10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission file number 1-10000

Wachovia Corporation

(Exact name of registrant as specified in its charter)

North Carolina	56-0898180
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Wachovia Corporation
One Wachovia Center
Charlotte, North Carolina 28288-0013
(Address of principal executive offices)
(Zip Code)

(704) 374-6565
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   [X]       No   [   ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes   [X]       No   [   ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes   [   ]       No   [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

1,332,209,051 shares of Common Stock, par value $3.33 1/3 per share, were outstanding as of July 31, 2003.

     Wachovia Corporation (formerly named First Union Corporation, “Wachovia”) may from time to time make written or oral forward-looking statements, including statements contained in Wachovia’s filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the Exhibits hereto and thereto), in its reports to stockholders and in other Wachovia communications, which are made in good faith by Wachovia pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

     These forward-looking statements include, among others, statements with respect to Wachovia’s beliefs, plans, objectives, goals, guidelines, expectations, financial condition, results of operations, future performance and business of Wachovia, including without limitation, (i) statements relating to the benefits of the merger between the former Wachovia Corporation (“Legacy Wachovia”) and Wachovia completed on September 1, 2001 (the “Merger”), including future financial and operating results, cost savings, enhanced revenues and the accretion to reported earnings that may be realized from the Merger, (ii) statements relating to the benefits of the retail securities brokerage combination transaction between Wachovia and Prudential Financial, Inc., which was consummated on July 1, 2003 (the “Brokerage Transaction”), including future financial and operating results, cost savings, enhanced revenues and the accretion of reported earnings that may be realized from the Brokerage Transaction, (iii) statements regarding certain of Wachovia’s goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (iv) statements preceded by, followed by or that include the words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, “projects”, “outlook” or similar expressions. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond Wachovia’s control). The following factors, among others, could cause Wachovia’s financial performance to differ materially from that expressed in such forward-looking statements: (1) the risk that the businesses of Wachovia and Legacy Wachovia in connection with the Merger or the Brokerage Transaction will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the Merger or the Brokerage Transaction may not be fully realized or realized within the expected time frame; (3) revenues following the Merger or the Brokerage Transaction may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the Merger or the Brokerage Transaction, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the strength of the United States economy in general and the strength of the local economies in which Wachovia conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Wachovia’s loan portfolio and allowance for loan losses; (6) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (7) inflation, interest rate, market and monetary fluctuations; (8) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on Wachovia’s capital markets and capital management activities, including, without limitation, Wachovia’s mergers and acquisition advisory business, equity and debt underwriting activities, private equity investment activities, derivative securities activities, investment and wealth management advisory businesses, and brokerage activities; (9) the timely development of competitive new products and services by Wachovia and the acceptance of these products and services by new and existing customers; (10) the willingness of customers to accept third party products marketed by Wachovia; (11) the willingness of customers to substitute competitors’ products and services for Wachovia’s products and services and vice versa; (12) the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); (13) technological changes; (14) changes in consumer spending and saving habits; (15) the effect of corporate restructurings, acquisitions and/or dispositions, including, without limitation, the Merger and the Brokerage Transaction, and the actual restructuring and other expenses related thereto, and the failure to achieve the expected revenue growth and/or expense savings from such corporate restructurings, acquisitions and/or dispositions; (16) the growth and profitability of Wachovia’s noninterest or fee income being less than expected; (17) unanticipated regulatory or judicial proceedings or rulings; (18) the impact of changes in accounting principles; (19) adverse changes in financial performance and/or condition of Wachovia’s borrowers which could impact repayment of such borrowers’ outstanding loans; (20) the impact on Wachovia’s businesses, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts; and (21) Wachovia’s success at managing the risks involved in the foregoing.

     Wachovia cautions that the foregoing list of important factors is not exclusive. Wachovia does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of Wachovia.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

     The following unaudited consolidated financial statements of Wachovia within Item 1 include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation of such consolidated financial statements for the periods indicated.

Notes to Consolidated Financial Statements begin on the next page.

NOTE 1: BASIC AND DILUTED EARNINGS PER COMMON SHARE

     The calculation of basic and diluted earnings per common share for the three and six months ended June 30, 2003, and June 30, 2002, is presented below.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions, except per share data)	2003			2002			2003			2002
Income before dividends on preferred stock	$	1,032			855			2,059			1,768
Dividends on preferred stock		(1	)		(6	)		(5	)		(12	)
Income available to common stockholders	$	1,031			849			2,054			1,756
Basic earnings per common share	$	0.77			0.62			1.54			1.29
Diluted earnings per common share	$	0.77			0.62			1.53			1.28
Average common shares — basic		1,333			1,360			1,334			1,357
Common share equivalents, unvested restricted stock, incremental common shares from forward purchase contracts and convertible long-term debt assumed converted		13			15			12			13
Average common shares — diluted		1,346			1,375			1,346			1,370

NOTE 2: STOCK-BASED COMPENSATION

     The Company has stock option plans under which incentive and nonqualified stock options may be granted periodically to certain employees. The Company’s stock options typically have an exercise price equal to the fair value of the stock on the date of grant, and vest based on continued service with the Company for a specified period, which is one to five years for the options included in the table below. The expense is amortized ratably over the vesting period.

     Under the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, there are two methods of accounting for stock options, the intrinsic value method and the fair value method. Upon the initial adoption of SFAS 123 in 1996, the Company elected to continue to use the intrinsic value method, which resulted in no expense being recognized related to the Company’s stock options.

     The Company adopted the fair value method of accounting for stock options in 2002. Under the fair value method, expense is measured on the date of grant using an option pricing model with market assumptions. Option pricing models require the use of highly subjective assumptions, including expected stock price volatility, which if changed can materially affect fair value estimates. Accordingly, the model does not necessarily provide a reliable single measure of the fair value of the Company’s stock options.

     Under the prospective transition provisions of SFAS 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, the Company adopted the fair value method effective as of the beginning of the year in which the decision was made, or January 1, 2002, and only for stock option awards made in 2002 and thereafter. Prior awards will continue to be accounted for under the intrinsic value method. Awards granted in 2003 and 2002 vest over five years and three years, respectively. Therefore, the cost related to stock-based compensation included in the determination of income in 2003 and 2002 is less than that which would have been applied to all awards since the original effective date of SFAS 123.

     The effect on net income available to common stockholders and earnings per share as if the fair value method had been applied to all outstanding and unvested awards in each period, is presented below.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions, except per share data)	2003			2002			2003			2002
Net income available to common stockholders, as reported	$	1,031			849			2,054			1,756
Add stock-based employee compensation expense included in reported net income, net of income taxes		18			13			31			13
Deduct total stock-based employee compensation expense determined under fair value method for all awards, net of income taxes		(35	)		(30	)		(65	)		(46	)
Pro forma net income available to common stockholders	$	1,014			832			2,020			1,723
PER COMMON SHARE DATA
Basic — as reported	$	0.77			0.62			1.54			1.29
Basic — pro forma		0.76			0.61			1.51			1.27
Diluted — as reported		0.77			0.62			1.53			1.28
Diluted — pro forma	$	0.75			0.61			1.50			1.26

     The weighted average grant date fair values of options under the stock option plans were $8.38, $10.39, and $5.21 in 2003, 2002, and 2001, respectively. The weighted average grant date fair value of options under the employee stock plan awarded to substantially all employees in 1999 was $7.90. The more significant assumptions used in estimating the fair value of stock options in 2003, 2002, and 2001 included risk-free interest rates of 3.15 percent, 4.65 percent, and 4.45 percent to 5.88 percent, respectively; dividend yields of 3.10 percent, 2.53 percent, and 2.99 percent, respectively; weighted average expected lives of the stock options of 6.0 years, 6.0 years, and 4.0 years, respectively; and volatility of the Company’s common stock of 28 percent in 2003, and 29 percent in 2002 and 2001. Additionally, the estimated fair value of stock option awards is reduced by an estimate of forfeiture experience which was 8.0 percent, 7.5 percent and 10.0 percent in 2003, 2002 and 2001, respectively.

NOTE 3: GUARANTEES

     In November 2002, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation (“FIN”) No. 45. FIN 45 requires that a liability be recorded for the fair value of certain guarantees. The initial measurement and recognition provisions of FIN 45 are effective for applicable guarantees written or modified after December 31, 2002. The adoption of these recognition provisions resulted in recording liabilities associated with standby letters of credit and certain liquidity facilities that we provide to conduits, for which the fees are received at periods other than at the beginning of the term. FIN 45 also requires disclosure of these and certain other guarantees in place at the date of the financial statements. The maximum risk of loss and the carrying value of Wachovia’s guarantees subject to the recognition and disclosure requirements of FIN 45 and in place at June 30, 2003, are presented below.

			June 30, 2003
					Maximum
			Carrying		Risk of
(In millions)			Value		Loss
Standby letters of credit			$	70		25,727
Liquidity
	Conduit transactions			37		17,481
	Asset securitizations			3		12,038
Other financial guarantees				57		1,006
Residual value guarantees on operating leases				2		645
		Total guarantees subject to recognition under FIN 45		169		56,897
Written put options				677		2,941
Contingent consideration				—		276
		Total guarantees subject to disclosure under FIN 45	$	846		60,114

NOTE 4: VARIABLE INTEREST ENTITIES

     In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, which addresses consolidation of variable interest entities (“VIEs”), certain of which are also referred to as special purpose entities (“SPEs”). VIEs are entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Under the provisions of FIN 46, a company is to consolidate a VIE if the company has a variable interest (or combination of variable interests) that will absorb a majority of the VIE’s expected losses if they occur, receive a majority of the VIE’s expected residual returns if they occur or both. The company that consolidates a VIE is called the primary beneficiary. The provisions of FIN 46 are applicable to variable interests in VIEs created after January 31, 2003. Variable interests in VIEs created before February 1, 2003, are subject to the provisions of FIN 46 no later than July 1, 2003.

     The Company arranges financing for certain customer transactions through multi-seller commercial paper conduits that provide its customers with access to the commercial paper market. The Company provides liquidity commitments to these multi-seller conduits that the Company administers. As currently structured, these conduits are VIEs in which the Company is the primary beneficiary. Accordingly, on July 1, 2003, the Company consolidated these conduits. This consolidation added $10 billion of assets, representing $5 billion of securities and $5 billion of other earning assets and $10 billion of short-term commercial paper borrowings.

     The Company did not consolidate or de-consolidate any other significant variable interest entities in connection with the adoption and implementation of FIN 46; thus the adoption and implementation did not have a material impact on it’s consolidated financial position or results of operations, other than as indicated above. However, the continued consolidation of trusts associated with the trust preferred securities and the appropriate balance sheet classification of the securities under FIN 46 is still being determined.

     FIN 46 also requires disclosure of significant variable interests the Company has in VIEs for which it is not the primary beneficiary and thus not required to consolidate. The Company provides liquidity guarantees to other conduits not administered by the Company, related to Company assets transferred to these conduits. These liquidity guarantees represent the most significant variable interests the Company has in these conduits. The Company has variable interests in these other conduits, which have total assets of $8.4 billion, that represent a maximum exposure to loss of $2.4 billion at June 30, 2003. The Company is not the primary beneficiary of these VIEs and is not required to consolidate them.

NOTE 5: RESTRUCTURING EXPENSES

     In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. Under the provisions of SFAS 146, a liability for costs associated with exit or disposal activities is recognized only when a liability has been incurred. Previously, under EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring), a liability was recognized when management committed to a plan of disposal and the plan met certain criteria, even though commitment to a plan did not, by itself, necessarily result in a liability. Specifically, under SFAS 146, involuntary employee termination costs associated with a one-time termination plan in excess of benefits that would be paid under an ongoing severance plan are recorded on the date that employees are notified, if the period between notification and termination is the lesser of 60 days or the legally required notification period. Otherwise, these costs are recognized evenly over the period from notification to termination. Involuntary termination costs under an ongoing plan are recorded under SFAS 112, Employers’ Accounting for Postemployment Benefits, on the date that management has committed to an exit or disposal plan. Under SFAS 146, costs associated with terminating a contract, including leases, are recognized when the contract is legally terminated or the benefits of the contract are no longer being realized. In addition, SFAS 146 requires certain disclosures that were not previously required under EITF 94-3. SFAS 146 is effective for exit plans initiated after December 31, 2002. The result of this standard is that personnel costs previously recorded as restructuring under EITF 94-3 are now accounted for under SFAS 112 and classified as merger-related.

     The First Union and Wachovia merger was initiated in 2001, but certain merger integration activities were not finalized as of December 31, 2002, and accordingly, certain of those activities will be subject to the provisions of SFAS 146 primarily, occupancy and contract cancellations. The merger integration activities to be completed after December 31, 2002, are branch conversion and consolidation, system conversions, advertising and consolidation of other premises. The Company expects to complete these merger activities by August 31, 2004. The costs associated with these activities are included in merger-related and restructuring expenses in the consolidated statements of income. Merger-related and restructuring expenses are not allocated to the Company’s core business segments. The following table discloses the total amount and types of costs expected for Wachovia merger activities initiated after December 31, 2002. Of the amounts recorded in the six months ended June 30, 2003, $5 million was paid in the period, and accordingly, there was a $6 million liability, all related to occupancy at June 30, 2003. These costs are included in the previously announced estimated maximum of $1.4 billion of one-time charges related to the First Union and Wachovia merger.

	Occupancy
	and			Contract
(In millions)	Equipment			Cancellations			Total
Total estimated costs	$	79			6			85
Recorded in current period		(8	)		(3	)		(11	)
Estimated costs remaining	$	71			3			74

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS

     The Consolidated Balance Sheets of Wachovia and subsidiaries at June 30, 2003, June 30, 2002, and December 31, 2002, respectively, set forth on page 72 of Wachovia’s Second Quarter 2003 Financial Supplement for the six months ended June 30, 2003 (the “Financial Supplement”), are incorporated herein by reference.

     The Consolidated Statements of Income of Wachovia and subsidiaries for the three and six months ended June 30, 2003 and 2002, set forth on pages 73 and 74 of the Financial Supplement, are incorporated herein by reference.

     The Consolidated Statements of Cash Flows of Wachovia and subsidiaries for the six months ended June 30, 2003 and 2002, set forth on page 75 of the Financial Supplement, are incorporated herein by reference.

     A copy of the Financial Supplement is being filed as Exhibit (19) to this Report.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Management’s Discussion and Analysis of Financial Condition and Results of Operations appears on pages 1 and 3 through 75 of the Financial Supplement and is incorporated herein by reference.

     A copy of the Financial Supplement is being filed as Exhibit (19) to this Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     Quantitative and Qualitative Disclosures About Market Risk appears on pages 25 through 29, page 55, and pages 66 through 68 of the Financial Supplement and is incorporated herein by reference.

     A copy of the Financial Supplement is being filed as Exhibit (19) to this Report.

Item 4. Controls and Procedures.

     Disclosure Controls and Procedures. Wachovia’s management, with the participation of Wachovia’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Wachovia’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Wachovia’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, Wachovia’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by Wachovia in the reports that it files or submits under the Exchange Act.

     Internal Control Over Financial Reporting. There have not been any changes in Wachovia’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Wachovia’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

     Wachovia and certain of our subsidiaries are involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising from the conduct of our business activities. These proceedings include actions brought against Wachovia and/or its subsidiaries with respect to transactions in which Wachovia and/or our subsidiaries acted as lender, underwriter, financial advisor, broker or activities related thereto. Although there can be no assurance as to the ultimate outcome, Wachovia and/or our subsidiaries have generally denied, or believe we have a meritorious defense and will deny, liability in all significant cases pending against us, including the matters described in Wachovia’s Annual Report on Form 10-K for the year ended December 31, 2002, and Quarterly Report on Form 10-Q for the period ended March 31, 2003, and we intend to defend vigorously each such case. Reserves are established for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts reserved for those claims. Based on information currently available, advice of counsel, available insurance coverage and established reserves, Wachovia believes that the eventual outcome of the actions against Wachovia and/or its subsidiaries, including the matters described below and in Wachovia’s Annual Report on Form 10-K for the year ended December 31, 2002, and Quarterly Report on Form 10-Q for the period ended March 31, 2003, will not, in the aggregate, have a material adverse effect on Wachovia’s consolidated financial position or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to Wachovia’s results of operations for any particular period.

     In the Matter of KPMG LLP Certain Auditor Independence Issues. On June 19, 2003, the Securities and Exchange Commission informally requested Wachovia to produce certain documents concerning any agreements or understandings by which Wachovia referred clients to KPMG LLP during the period January 1, 1997 to the present. Wachovia is cooperating with the SEC in its inquiry. Wachovia believes the SEC's inquiry relates to certain tax services offered to Wachovia customers by KPMG LLP during the period from 1997 to early 2002, and whether these activities might have caused KPMG LLP not to be "independent" from Wachovia, as defined by applicable accounting and SEC regulations requiring auditors of an SEC-reporting company to be independent of the company. Wachovia and/or KPMG LLP received fees in connection with a small number of personal financial consulting transactions related to these services. During all periods covered by the SEC's inquiry, including the present, KPMG LLP has confirmed to Wachovia that KPMG LLP was and is "independent" from Wachovia under applicable accounting and SEC regulations.

Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits.

Exhibit No.	Description
(4)	Instruments defining the rights of security holders, including indentures.*
(12)(a)	Computations of Consolidated Ratios of Earnings to Fixed Charges.
(12)(b)	Computations of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends.
(19)	Wachovia’s Second Quarter 2003 Financial Supplement.
(31)(a)	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)(b)	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)(a)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32)(b)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*     Wachovia agrees to furnish to the Commission upon request, copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of Wachovia and its consolidated subsidiaries.

     (b)  Reports on Form 8-K.

     During the quarter ended June 30, 2003, Current Reports on Form 8-K, dated April 1, 2003, April 16, 2003, and April 22, 2003, were filed with the Commission by Wachovia. In addition, a Current Report on Form 8-K dated July 17, 2003, has been filed with the Commission by Wachovia.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WACHOVIA CORPORATION
Date: August 14, 2003	By:	/s/ DAVID M. JULIAN
		David M. Julian
		Senior Vice President and Corporate Controller
		(Principal Accounting Officer)

EXHIBIT INDEX

Exhibit No.	Description
(4)	Instruments defining the rights of security holders, including indentures.*
(12)(a)	Computations of Consolidated Ratios of Earnings to Fixed Charges.
(12)(b)	Computations of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends.
(19)	Wachovia’s Second Quarter 2003 Financial Supplement.
(31)(a)	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)(b)	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)(a)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32)(b)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*     Wachovia agrees to furnish to the Commission upon request, copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of Wachovia and its consolidated subsidiaries.

EX-12.A 3 g84377exv12wa.htm COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS

Exhibit (12)(a)

WACHOVIA CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES

					Six
					Months			Years Ended December 31,
					Ended
					June 30,
(In millions)					2003			2002		2001		2000		1999		1998
EXCLUDING INTEREST
	ON DEPOSITS
	Pretax income from continuing operations				$	2,952			4,667		2,293		632		4,831		3,965
	Fixed charges, excluding capitalized interest					1,203			2,500		3,734		4,963		3,751		3,504
		Earnings	(A	)	$	4,155			7,167		6,027		5,595		8,582		7,469
Interest, excluding interest on deposits					$	1,118			2,333		3,581		4,828		3,645		3,395
One-third of rents						85			167		153		135		106		109
Capitalized interest						—			—		—		—		—		—
		Fixed charges	(B	)	$	1,203			2,500		3,734		4,963		3,751		3,504
Consolidated ratios of earnings to fixed charges, excluding interest on deposits			(A)/	(B)		3.45	X		2.87		1.61		1.13		2.29		2.13
INCLUDING INTEREST
	ON DEPOSITS
	Pretax income from continuing operations				$	2,952			4,667		2,293		632		4,831		3,965
	Fixed charges, excluding capitalized interest					2,461			5,930		8,478		10,232		7,805		7,820
		Earnings	(C	)	$	5,413			10,597		10,771		10,864		12,636		11,785
Interest, including interest on deposits					$	2,376			5,763		8,325		10,097		7,699		7,711
One-third of rents						85			167		153		135		106		109
Capitalized interest						—			—		—		—		—		—
		Fixed charges	(D	)	$	2,461			5,930		8,478		10,232		7,805		7,820
Consolidated ratios of earnings to fixed charges, including interest on deposits			(C)/	(D)		2.20	X		1.79		1.27		1.06		1.62		1.51

EX-12.B 4 g84377exv12wb.htm COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS

Exhibit (12)(b)

WACHOVIA CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
     AND PREFERRED STOCK DIVIDENDS

					Six
					Months			Years Ended December 31,
					Ended
					June 30,
(In millions)					2003			2002		2001		2000		1999		1998
EXCLUDING INTEREST
	ON DEPOSITS
	Pretax income from continuing operations				$	2,952			4,667		2,293		632		4,831		3,965
	Fixed charges, excluding preferred stock dividends and capitalized interest					1,203			2,500		3,734		4,963		3,751		3,504
		Earnings	(A	)	$	4,155			7,167		6,027		5,595		8,582		7,469
Interest, excluding interest on deposits					$	1,118			2,333		3,581		4,828		3,645		3,395
One-third of rents						85			167		153		135		106		109
Preferred stock dividends						5			19		6		—		—		—
Capitalized interest						—			—		—		—		—		—
		Fixed charges	(B	)	$	1,208			2,519		3,740		4,963		3,751		3,504
Consolidated ratios of earnings to fixed charges and preferred stock dividends, excluding interest on deposits			(A)/	(B)		3.44	X		2.85		1.61		1.13		2.29		2.13
INCLUDING INTEREST
	ON DEPOSITS
	Pretax income from continuing operations				$	2,952			4,667		2,293		632		4,831		3,965
	Fixed charges, excluding preferred stock dividends and capitalized interest					2,461			5,930		8,478		10,232		7,805		7,820
		Earnings	(C	)	$	5,413			10,597		10,771		10,864		12,636		11,785
Interest, including interest on deposits					$	2,376			5,763		8,325		10,097		7,699		7,711
One-third of rents						85			167		153		135		106		109
Preferred stock dividends						5			19		6		—		—		—
Capitalized interest						—			—		—		—		—		—
		Fixed charges	(D	)	$	2,466			5,949		8,484		10,232		7,805		7,820
Consolidated ratios of earnings to fixed charges and preferred stock dividends, including interest on deposits			(C)/	(D)		2.20	X		1.78		1.27		1.06		1.62		1.51

EX-19 5 g84377exv19.htm WACHOVIA'S 2ND QUARTER 2003 FINANCIAL SUPPLEMENT

WACHOVIA CORPORATION AND SUBSIDIARIES

Second Quarter 2003

Management’s Discussion and Analysis
Quarterly Financial Supplement
Three Months Ended June 30, 2003

WACHOVIA CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL SUPPLEMENT
SIX MONTHS ENDED JUNE 30, 2003
TABLE OF CONTENTS

PAGE

Explanation of Our Use of Non-GAAP Financial Measures	1
Financial Highlights	2
Management’s Discussion and Analysis	3
Selected Statistical Data	33
Summaries of Income, Per Common Share and Balance Sheet Data	34
Merger-Related and Restructuring Expenses	35
Business Segments	36
Net Trading Revenue — Investment Banking	52
Selected Ratios	53
Trading Account Assets and Liabilities	54
Securities	55
Loans — On-Balance Sheet, and Managed and Servicing Portfolios	56
Loans Held for Sale	57
Allowance for Loan Losses and Nonperforming Assets	58
Nonaccrual Loan Activity	59
Goodwill and Other Intangible Assets	60
Deposits	61
Time Deposits in Amounts of $100,000 or More	62
Long-Term Debt	63
Changes in Stockholders’ Equity	64
Capital Ratios	65
Risk Management Derivative Financial Instruments	66
Risk Management Derivative Financial Instruments — Expected Maturities	68
Risk Management Derivative Financial Instruments Activity	68
Net Interest Income Summaries — Five Quarters Ended June 30, 2003	69
Net Interest Income Summaries — Six Months Ended June 30, 2003 and 2002	71
Consolidated Balance Sheets — Five Quarters Ended June 30, 2003	72
Consolidated Statements of Income — Five Quarters Ended June 30, 2003	73
Consolidated Statements of Income — Six Months Ended June 30, 2003 and 2002	74
Consolidated Statements of Cash Flows — Six Months Ended June 30, 2003 and 2002	75

EXPLANATION OF OUR USE OF NON-GAAP FINANCIAL MEASURES

     In addition to the results of operations presented in accordance with generally accepted accounting principles (GAAP), our management uses, and this quarterly financial supplement contains, certain non-GAAP financial measures, such as expenses excluding merger-related and restructuring expenses, the dividend payout ratio on a basis that excludes merger-related and restructuring expenses and other intangible amortization, and net interest income on a tax-equivalent basis. We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends, and facilitates comparisons with the performance of others in the financial services industry.

     Specifically, we believe that the exclusion of merger-related and restructuring expenses permits evaluation and a comparison of results for ongoing business operations, and it is on this basis that our management internally assesses our performance. Those non-operating items also are excluded from our segment measures used internally to evaluate segment performance in accordance with GAAP because management does not consider them particularly relevant or useful in evaluating the operating performance of our business segments. For additional information regarding segment performance, see the Business Segments section on page 11. This quarterly financial supplement contains information regarding estimates of our future expenses excluding merger-related and restructuring expenses. The amount and timing of those future merger-related and restructuring expenses, however, are not estimable until such expenses actually occur, and therefore, reconciliation information relating to those future expenses and GAAP expenses has not been provided.

     In addition, because of the significant amount of deposit base intangible amortization, we believe that the exclusion of this expense provides investors with consistent and meaningful comparisons to other financial service firms. Also, our management makes recommendations to our board of directors about dividend payments based on reported earnings excluding merger-related and restructuring expenses and other intangible amortization (cash earnings), and has communicated certain cash dividend payout ratio goals to investors. We believe that the cash dividend payout ratio is useful to investors because it provides investors with a better understanding of and permits investors to monitor our dividend payout policy.

     This quarterly financial supplement also includes net interest income on a tax-equivalent basis. We believe that the presentation of net interest income on a tax-equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

     Although we believe that the above mentioned non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliation of these non-GAAP financial measures from GAAP to non-GAAP is presented below.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In millions)	2003			2002		2003		2002
Net interest income (GAAP)	$	2,520			2,461		5,034		4,887
Tax-equivalent adjustment		63			54		127		105
Net interest income (Tax-equivalent)	$	2,583			2,515		5,161		4,992
DIVIDEND PAYOUT RATIOS ON COMMON SHARES
Diluted earnings per common share (GAAP)	$	0.77			0.62		1.53		1.28
Other intangible amortization		0.06			0.08		0.13		0.16
Merger-related and restructuring expenses		0.04			0.06		0.07		0.06
Earnings per share (Cash basis)	$	0.87			0.76		1.73		1.50
Dividends paid per common share	$	0.29			0.24		0.55		0.48
Dividend payout ratios (GAAP)		37.66	%		38.71		35.95		37.50
Dividend payout ratios (Cash basis)(a)		33.33	%		31.58		31.79		32.00

(a) Dividend payout ratios are calculated by dividing dividends per common share by earnings per common share on a cash basis.

1

FINANCIAL HIGHLIGHTS

		Three Months Ended								Six Months Ended
		June 30,								June 30,
							Percent								Percent
							Increase								Increase
(Dollars in millions, except per share data)		2003			2002		(Decrease)			2003			2002		(Decrease)
EARNINGS SUMMARY
Net interest income (GAAP)		$	2,520			2,461		2	%	$	5,034			4,887		3	%
Tax-equivalent adjustment			63			54		17			127			105		21
Net interest income (Tax-equivalent)			2,583			2,515		3			5,161			4,992		3
Fee and other income			2,166			2,110		3			4,244			4,137		3
	Total revenue (Tax-equivalent)		4,749			4,625		3			9,405			9,129		3
Provision for loan losses			195			397		(51	)		419			736		(43	)
Other noninterest expense			2,777			2,622		6			5,476			5,231		5
Merger-related and restructuring expenses			96			143		(33	)		160			135		19
Other intangible amortization			131			161		(19	)		271			329		(18	)
	Total noninterest expense		3,004			2,926		3			5,907			5,695		4
Income before income taxes (Tax-equivalent)			1,550			1,302		19			3,079			2,698		14
Income taxes			455			393		16			893			825		8
Tax-equivalent adjustment			63			54		17			127			105		21
Net income			1,032			855		21			2,059			1,768		16
Dividends on preferred stock			1			6		(83	)		5			12		(58	)
Net income available to common stockholders		$	1,031			849		21	%	$	2,054			1,756		17	%
Diluted earnings per common share		$	0.77			0.62		24	%	$	1.53			1.28		20	%
Return on average common stockholders’ equity			12.78	%		11.52		—			12.86	%		12.12		—
Return on average assets			1.21			1.09		—			1.22			1.13		—
Overhead efficiency ratio			63.27	%		63.28					62.82	%		62.39
ASSET QUALITY
Allowance as % of loans, net			1.66	%		1.86		—			1.66	%		1.86		—
Allowance as % of nonperforming assets			166			150		—			166			150		—
Net charge-offs as % of average loans, net			0.43			0.97		—			0.46			0.90		—
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale			1.04	%		1.24		—			1.04	%		1.24		—
CAPITAL ADEQUACY
Tier I capital ratio			8.33	%		7.83		—			8.33	%		7.83		—
Total capital ratio			11.92			11.89		—			11.92			11.89		—
Leverage ratio			6.78	%		6.75		—			6.78	%		6.75		—
OTHER FINANCIAL DATA
Net interest margin			3.78	%		3.97		—			3.82	%		3.94		—
Fee and other income as % of total revenue			45.60			45.63		—			45.12			45.32		—
Effective income tax rate			30.54	%		31.46		—			30.24	%		31.80		—
BALANCE SHEET DATA
Securities		$	73,764			60,999		21	%	$	73,764			60,999		21	%
Loans, net			162,833			158,800		3			162,833			158,800		3
Total assets			364,285			324,679		12			364,285			324,679		12
Total deposits			201,292			180,663		11			201,292			180,663		11
Long-term debt			37,051			37,931		(2	)		37,051			37,931		(2	)
Stockholders’ equity		$	32,464			30,379		7	%	$	32,464			30,379		7	%
OTHER DATA
Average diluted common shares (In millions)			1,346			1,375		(2	)%		1,346			1,370		(2	)%
Actual common shares (In millions)			1,332			1,371		(3	)		1,332			1,371		(3	)
Dividends paid per common share		$	0.29			0.24		21		$	0.55			0.48		15
Dividends paid per preferred share		$	0.01			0.06		(83	)	$	0.05			0.12		(58	)
Dividend payout ratio on common shares			37.66	%		38.71		—			35.95	%		37.50		—
Book value per common share		$	24.37			22.15		10		$	24.37			22.15		10
Common stock price			39.96			38.18		5			39.96			38.18		5
Market capitalization		$	53,228			52,347		2		$	53,228			52,347		2
Common stock to book price			164	%		172		—			164	%		172		—
FTE employees			81,316			82,686		(2	)		81,316			82,686		(2	)
Total financial centers/brokerage offices			3,176			3,347		(5	)		3,176			3,347		(5	)
ATMs			4,479			4,617		(3	)%		4,479			4,617		(3	)%

2

WACHOVIA

This discussion and other portions of this Quarterly Report contain various forward-looking statements. Please refer to our 2003 Second Quarter Report on Form 10-Q for a discussion of various factors that could cause our actual results to differ materially from those expressed in such forward-looking statements. Please refer to our 2002 Annual Report on Form 10-K for further information related to our critical accounting policies, off-balance sheet profile, risk governance and administration, and regulation and supervision.

Summary of Results of Operations
		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In millions, except per share data)		2003		2002		2003		2002
Net interest income (GAAP)		$	2,520		2,461		5,034		4,887
Tax-equivalent adjustment			63		54		127		105
Net interest income (a)			2,583		2,515		5,161		4,992
Fee and other income			2,166		2,110		4,244		4,137
	Total revenue (a)		4,749		4,625		9,405		9,129
Provision for loan losses			195		397		419		736
Other noninterest expense			2,777		2,622		5,476		5,231
Merger-related and restructuring expenses			96		143		160		135
Intangible amortization			131		161		271		329
	Total noninterest expense		3,004		2,926		5,907		5,695
Income taxes			455		393		893		825
Tax-equivalent adjustment			63		54		127		105
Net income			1,032		855		2,059		1,768
Dividends on preferred stock			1		6		5		12
Net income available to common stockholders			1,031		849		2,054		1,756
Diluted earnings per common share		$	0.77		0.62		1.53		1.28
(a) Tax-equivalent

Financial Summary Wachovia’s diversified mix of businesses produces both the interest income traditionally associated with a banking company and the fee income generated by such businesses as brokerage, asset management and investment banking. Although all of these businesses, to varying degrees, are affected by fluctuations in the financial markets and other external factors, our goal is to produce a balanced and growing revenue stream over the course of a business cycle.

     The benefit of this balanced business model and our distribution strength in a challenging economic environment was evident in the first six months of 2003, during which Wachovia increased net income to $2.1 billion, up 16 percent from the first six months of 2002. On a per common share basis, earnings increased 20 percent to $1.53. The increase in net income from the first six months of 2002 was driven by growth in net interest income and fee income, and a decline in the provision for loan losses, partially offset by an increase in noninterest expense. Net interest income benefited from growth in earning assets and a rapidly increasing proportion of low-cost core deposits relative to a planned decline in higher cost products such as certificates of deposit. Fee income growth from the first six months of 2002 was due primarily to improvement in trading account profits, lower net principal investing losses and an increase in asset securitization income.

     In addition, provision expense declined as our overall credit quality continued to improve. Our strategy is to actively reduce potential problem loans and certain large corporate loans, including the sale of at-risk credits whenever prudent.

3

     Total noninterest expense increased 4 percent from the first six months of 2002 due primarily to increases in higher revenue-based incentives, merger-related and restructuring expenses, stock option expense and nondiscretionary costs such as pension expense. Despite the increase in expenses, our continued emphasis on cost control and expense efficiencies gained from the First Union and Wachovia merger integration has enabled us to more effectively control core expense growth.

     Our board of directors increased the quarterly common stock dividend for the third quarter of 2003 by six cents per share, to 35 cents. This dividend is payable on September 15, 2003, to holders of record on August 29, 2003. This represents a cash dividend payout ratio of 40 percent on second quarter earnings, at the low end of the new corporate goal of 40 percent to 50 percent of cash earnings per share. Cash earnings per share exclude merger-related and restructuring expenses and intangible amortization. Additional information about our use of non-GAAP financial measures is on page 1.

     In connection with the First Union and Wachovia merger, shareholders of the former Wachovia received two First Union shares for each former Wachovia common share and were also given the right to choose either a one-time cash payment of 48 cents per common share of the former Wachovia or two of Wachovia’s Dividend Equalization Preferred shares (DEPs), which are a new class of preferred shares that pay dividends equal to the difference between the last dividend paid by the former Wachovia of 30 cents per share and the common stock dividend declared by the combined company. The dividend rights of the DEPs will cease once Wachovia’s total dividends paid to common stockholders for four consecutive quarters equal at least $1.20 per common share. In the first three quarters of 2003, Wachovia will pay total dividends equal to 90 cents per common share. Wachovia paid common stockholders total dividends of $1.00 per share in 2002 and 55 cents per share in the first six months of 2003. Because the third quarter 2003 dividend of 35 cents per share will exceed the former Wachovia’s historical 30 cents per share dividend, there will be no third quarter 2003 dividend on the DEPs. More information is in the Stockholders’ Equity section.

Outlook

     We continue to make excellent progress in meeting our corporate objectives of quality earnings growth, increased distribution of products and services, improved customer service, tight expense control and a strengthened balance sheet. Based on this consistent performance, our confidence in our balanced business model, our capital strength and improving market conditions, we have revised several growth targets for the full year 2003 compared with 2002. These new growth targets, which exclude the addition of the retail brokerage combination with Prudential Securities, Inc., and the impact of accounting changes related to variable interest entities, both discussed below, include:

• An increase in net interest income in the low single-digit percentage range;

• Growth in expenses (excluding merger-related and restructuring expenses) in the 2 percent to 3 percent range; and

• An estimated new tax rate of 33 percent.

     In addition, we continue to expect:

• A modest decline in the net interest margin from fourth quarter 2002;

• Fee income growth in the mid-single digit percentage range;

4

• Loan growth in the low- to mid-single digit percentage range compared with fourth quarter 2002 (excluding the impact of securitization activity);

• Improvement in credit quality trends, which led us to lower our expectations for net charge-offs as a percentage of average net loans to the 40 basis point to 50 basis point range, although we cannot predict the timing of net charge-offs; and

• A provision that is modestly higher than net charge-offs.

     Expense growth will reflect our continuing investments for the future, including upgrading technology and infrastructure in the financial centers and making selected investments to enhance our distribution in retail brokerage and insurance, and to expand investment management capabilities. In addition, our tier 1 capital ratio improved from year-end 2002 to 8.33 percent at June 30, 2003. In 2003, we expect to maintain a tier 1 capital ratio in the 8.25 percent to 8.35 percent range.

     On July 1, 2003, we consummated the combination of the retail brokerage forces of Wachovia and Prudential Financial, Inc. Under the terms of the agreement, Wachovia owns a 62 percent interest in the new retail brokerage firm, which will be a consolidated subsidiary of Wachovia, and Prudential owns the remaining 38 percent interest. This transaction created the third largest retail brokerage firm in the country, based on combined client assets of $532 billion and 12,000 registered representatives. The firm will ultimately operate under the brand name of Wachovia Securities and will have a national footprint of more than 3,400 brokerage locations, including 700 dedicated retail offices in 48 states and Washington, D.C. The new full-service firm will provide advice to clients based on research from multiple providers and have access to a broad suite of financial products and services from its parent organizations. The transaction is expected to be accretive to earnings per share in 2004, excluding the effect of merger-related and restructuring expenses. Merger-related and restructuring expenses and exit cost purchase accounting adjustments of approximately $1.1 billion pre-tax are projected in connection with this transaction over the anticipated 18-month integration period. In addition, we will record fair value purchase accounting adjustments on the Prudential assets and liabilities contributed to the new brokerage firm. For the rest of 2003, the transaction is expected to add approximately $13 billion of earning assets; $50 million to $60 million in net interest income; $1 billion in fee income; and $1 billion in expenses, excluding any merger-related and restructuring expenses referenced above that occur in 2003; however, we cannot predict when such expenses will occur.

     We are optimistic about the future due to our growth strategies and the demographic trends that favor our core businesses of the General Bank, Capital Management, Wealth Management, and the Corporate and Investment Bank. Financial performance has been enhanced by increased attention to customer service. This level of service and our broad distribution capability have contributed to growth in low-cost core deposits, where we are among the industry’s leaders in our markets. At the same time, our balanced business model positions us well to attract our customers’ investment business.

     We will continue to evaluate our operations and organizational structures to ensure they are closely aligned with our goal of maximizing performance through increased efficiency and competitiveness in our four core businesses. When consistent with our overall business strategy, we may consider the disposition of certain assets, branches, subsidiaries or lines of business. We continue to routinely explore acquisition opportunities in areas that would complement our core businesses, and frequently conduct due diligence activities in connection with possible

5

acquisitions. As a result, acquisition discussions and, in some cases, negotiations frequently take place and future acquisitions involving cash, debt or equity securities could occur.

     On July 1, 2003, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. (FIN 46), Consolidation of Variable Interest Entities. Under FIN 46, the consolidation of commercial paper conduits that we administer will add an estimated $10 billion in assets and $10 billion in short-term commercial paper borrowings; $60 million of fees will be recharacterized as net interest income for the second half of 2003. These assets and liabilities are the only significant additions to our balance sheet from the adoption of FIN 46. The Accounting and Regulatory Matters section has further information.

     A settlement was reached on or around May 1, 2003, in the lawsuit captioned In re VISA Check/Master Money Antitrust Litigation. In the settlement, among other things, VISA, Inc. agreed to pay approximately $2 billion to the plaintiff retail companies over a multi-year period, as well as take certain other actions, including lowering certain interchange rates and rates for signature-based debit card transactions. As a result of this settlement, our revenue from debit cards is expected to decrease approximately $30 million to $35 million pre-tax for the rest of 2003. Conditions of the settlement permit VISA to renegotiate debit card interchange rates as of January 1, 2004; therefore, we do not have sufficient information to fully assess the impact of this settlement beyond 2003, but we do not believe it will have a material adverse effect on our consolidated financial position or results of operations.

Critical Accounting Policies

     Our accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America, and they conform to general practices within the applicable industries. The application of certain of these principles involves a significant amount of judgment and the use of estimates based on assumptions that involve significant uncertainty at the time of estimation.

     We have identified the following critical accounting policies: allowance for loan losses, retained interests in securitizations, principal investing, consolidation, pensions, stock options, goodwill impairment and contingent liabilities.

Consolidation As discussed further in the Accounting and Regulatory Matters section, the provisions of FASB Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, (FIN 46) were effective on February 1, 2003, for new variable interest entities created after January 31, 2003, and on July 1, 2003, for variable interest entities created before February 1, 2003. Applying the provisions of FIN 46 involves a significant degree of subjectivity including the determination of the entities in which we have a potential variable interest, whether that entity is a variable interest entity and, subject to the provisions of FIN 46, whether we are the primary beneficiary of the entity, and thus required to consolidate the variable interest entity. These determinations require the assessment of both quantitative and qualitative factors regarding both our interests in the entities and characteristics of the entities themselves. The assessment of these factors involves a significant amount of judgment, and at times, estimation of expected operating results of an entity.

Pensions In May 2003, we amended our qualified pension plan to convert to a cash balance plan effective January 1, 2008. Until that time, benefits will continue to be earned and paid under the current plan. In connection with this plan amendment, we remeasured plan assets and benefit obligations as of May 31, 2003, and recalculated 2003 pension

6

expense. As a result of the plan amendment, updated assumptions and company contributions to the plan, our pension expense is expected to increase for the full year 2003 compared with 2002 by $73 million. The assumptions used in calculating our 2003 pension expense for the rest of 2003 are a discount rate of 6.00 percent (compared with 6.75 percent at the beginning of the year), a weighted average rate of increase in future compensation levels of 3.50 percent (compared with 3.75 percent at the beginning of the year) and an expected rate of return on plan assets of 8.50 percent (unchanged). As of May 31, 2003, the fair value of the plan assets exceeded both the total obligation and the accumulated benefit obligation, and as a result, the plan was over-funded. In addition, in May 2003, we also amended our postretirement medical plan effective January 1, 2008. As a result of the plan amendments and updated assumptions, retirement benefit expense is expected to decrease for the full year 2003 compared with 2002 by $16 million.

Stock Options Stock options granted in April 2003 will vest over the five years from the date of grant. Using the Black-Scholes option pricing model, the grant date fair value of options awarded in 2003 was $8.38 per share. The assumptions used in determining the fair value of these options include a risk-free interest rate of 3.15 percent, a dividend yield of 3.10 percent, a weighted average expected life of 6.0 years and volatility of 28.0 percent. Assuming we were to continue our stock option grants at comparable levels for the next five years and assuming all fair value and vesting assumptions and outstanding shares remain unchanged, the after-tax impact on net income available to common stockholders and diluted earnings per share would be approximately $65 million, or $0.05, in 2003; $86 million, or $0.06, in 2004; $69 million, or $0.05, in 2005; $77 million, or $0.06, in 2006; $97 million, or $0.07, in 2007; and $102 million, or $0.08, in 2008.

     For more information on critical accounting policies, please refer to our 2002 Annual Report on Form 10-K.

Corporate Results of Operations

Average Balance Sheets and Interest Rates
		Six Months Ended					Six Months Ended
		June 30, 2003					June 30, 2002
		Average		Interest			Average		Interest
(In millions)		Balances		Rates			Balances		Rates
Interest-bearing bank balances		$	4,222		1.38	%	$	3,472		2.05	%
Federal funds sold			10,624		1.20			11,424		1.91
Trading account assets			17,281		4.61			14,733		4.78
Securities			70,546		5.67			57,177		6.58
Commercial loans, net			92,750		4.66			99,117		5.24
Consumer loans, net			65,099		5.84			57,214		7.03
	Total loans, net		157,849		5.15			156,331		5.89
Other earning assets			10,728		4.65			11,218		5.28
Risk management derivatives					0.57					0.52
	Total earning assets		271,250		5.58			254,355		6.24
Interest-bearing deposits			149,368		1.46			139,788		2.15
Federal funds purchased			37,676		1.58			32,132		1.82
Commercial paper			2,492		0.75			3,231		1.16
Securities sold short			7,431		2.76			6,616		2.39
Other short-term borrowings			4,219		1.58			3,676		2.69
Long-term debt			37,240		4.05			39,669		4.29
Risk management derivatives					0.09					0.12
	Total interest-bearing liabilities		238,426		2.01			225,112		2.60
Net interest income and margin		$	5,161		3.82	%	$	4,992		3.94	%

Net Interest Income and Margin Net interest income increased $169 million, or 3 percent in the first six months of 2003 from the first six months of 2002, while the net interest margin declined 12 basis points to 3.82 percent. The growth in net interest

7

income was due to an increase in earning assets supported by growth in low-cost core deposits. Typically bank liabilities, such as deposits, reprice consistent with changes in short-term rates, while many asset positions are influenced by longer-term rates. Our interest rate risk position generally benefits in a declining rate environment because liabilities reprice more quickly than assets; however, when long-term rates decline faster than short-term rates, this benefit is somewhat offset. The Interest Rate Risk Management section includes further information. The average federal funds discount rate declined 49 basis points from the first six months of 2002, while longer-term 5- and 10-year Treasury bond rates declined 171 basis points and 132 basis points, respectively. As a result of the decline in longer-term rates, prepayments on higher coupon mortgages in both the loan and mortgage-backed securities portfolios increased significantly. Our current reinvestment strategy is designed to minimize margin compression while reducing duration or long-term risk. If interest rates continue to remain low throughout 2003, we expect to experience modest margin compression.

     In order to maintain our targeted interest rate risk profile, derivatives are used to hedge the interest rate risk inherent in our assets and liabilities. In a declining rate environment, an increase in the contribution of derivatives, primarily interest rate swaps on fixed rate debt and floating rate loans, offsets declining net interest income from our balance sheet positions. However, it is important to evaluate hedge-related derivative income within the overall context of interest rate risk management. Our derivatives activity is undertaken as part of a program to manage interest rate risk and maintain a stable net interest margin. As one example, we use derivatives to swap our fixed rate debt issuances to floating rate debt. We do this rather than issue floating rate debt because there is a broader market for fixed rate debt. The Risk Governance and Administration section provides additional information on our methodology for interest rate risk management.

     The average rate on earning assets declined 66 basis points from the first six months of 2002 to 5.58 percent in the first six months of 2003, and the average rate on interest-bearing liabilities decreased 59 basis points from the first six months of 2002 to 2.01 percent in the first six months of 2003.

Fee and Other Income
		Three Months Ended						Six Months Ended
		June 30,						June 30,
(In millions)		2003			2002			2003			2002
Service charges		$	426			420			856			845
Other banking fees			248			241			481			477
Commissions			488			481			932			945
Fiduciary and asset management fees			461			466			899			943
Advisory, underwriting and other investment banking fees			208			192			345			328
Trading account profits			69			33			169			137
Principal investing			(57	)		(42	)		(101	)		(132	)
Securities gains			10			58			47			52
Other income			313			261			616			542
	Total fee and other income	$	2,166			2,110			4,244			4,137

Fee and Other Income Traditionally banks have earned fee and other income from service charges on deposit accounts and other banking products and services, and these continue to be one of the largest components of our fee income. In addition, we have balanced our earnings stream with a diversified mix of businesses that provide alternative financial products and services for the more sophisticated needs of our clients. These alternative products produce income in our brokerage, asset management and investment banking businesses from commissions and fees for financial advice, custody, insurance and sophisticated financing

8

alternatives such as loan syndications and asset securitizations. Additionally, we realize gains from selling our investments in securities such as bonds and equities. The fees on many of these products and services are based on market valuations, and therefore have been sensitive to downturns in the financial markets of the past two years. When the markets ultimately recover, we expect these market-sensitive businesses to rebound as well.

     Fee and other income increased from the first six months of 2002 due primarily to improvement in trading account profits, lower net principal investing losses and an increase in asset securitization income. Fiduciary and asset management fees declined as weak equity markets exerted downward pressure on market valuations.

     Service charges increased slightly from the first six months of 2002, as did other banking fees driven primarily by debit card income and mortgage-related fees. Commissions, which include brokerage and insurance commissions, were down due to subdued retail investor trading activity over the past year, although insurance commissions grew 20 percent from the first six months of 2002. Advisory, underwriting and other investment banking fees primarily include fees from asset securitization, loan syndication and debt underwriting businesses, as well as commitment fees. In these businesses, we act as the agent between our clients and the investors who provide financing. An improvement in equity market activity and strength in high yield and convertible bond originations enabled advisory, underwriting and other investment banking fees to grow 5 percent from the first six months of 2002.

     Trading account profits increased $32 million from the first six months of 2002. Strong convertible bond and nondollar trading, partially offset by higher credit default swap losses, drove trading revenues in the first six months of 2003. We anticipate lower trading account profits for the second half of 2003 because of seasonal slowdowns and the unusually strong results in the first half of the year.

     Principal investing, which includes the results of investments in equity and mezzanine securities, had lower net losses compared with the first six months of 2002 primarily due to a reduction in net losses in direct investments.

     Net portfolio securities gains in the first six months of 2003 were $47 million and included net gains from portfolio sales of $153 million offset by $106 million in impairment losses. Net portfolio securities gains of $52 million in the first six months of 2002 included net gains from portfolio sales of $137 million offset by $85 million in impairment losses.

     Other income increased $74 million from the first six months of 2002. Asset securitization and sales income in the first six months of 2003 was $220 million compared with $156 million in the first six months of 2002. Of the $64 million increase, $83 million related to mortgage securitization and sales partially offset by a decline of $19 million related to securitization and sales of prime equity lines. Market value adjustments on and the sale of loans held for sale resulted in a net gain of $74 million in the first six months of 2003 compared with $49 million in the first six months of 2002.

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Noninterest Expense
			Three Months Ended				Six Months Ended
			June 30,				June 30,
(In millions)			2003		2002		2003		2002
Salaries and employee benefits			$	1,748		1,665		3,447		3,328
Occupancy				190		194		387		389
Equipment				238		231		472		457
Advertising				34		25		66		44
Communications and supplies				136		132		277		266
Professional and consulting fees				104		96		203		184
Sundry expense				327		279		624		563
	Other noninterest expense			2,777		2,622		5,476		5,231
Merger-related and restructuring expenses				96		143		160		135
Other intangible amortization				131		161		271		329
		Total noninterest expense	$	3,004		2,926		5,907		5,695

Noninterest Expense Noninterest expense increased 4 percent from the first six months of 2002 due primarily to increases in higher revenue-based incentives, merger-related and restructuring expenses, stock option expense, and nondiscretionary costs such as pension expense. The increase in noninterest expense was partially offset by the impact of expense control initiatives and merger efficiencies. Salaries and employee benefit expense in the first six months of 2003 included additional pension expense of $40 million, and $47 million related to the fair value method of accounting for stock options compared with $19 million in the first six months of 2002. Advertising expense increased due to rebranding activity.

Merger-Related and Restructuring Expenses We continue to execute a number of plans to integrate the operations of First Union and the former Wachovia. Merger-related and restructuring expenses will continue to be recognized through September 2004. Beginning in the first quarter of 2003, restructuring expenses are being recorded in accordance with Statement of Financial Accounting Standards (SFAS) No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which became effective January 1, 2003. The Accounting and Regulatory Matters section has further information.

     In the first quarter of 2003, we reduced our estimate of anticipated one-time charges related to the First Union and Wachovia merger by $110 million to $125 million, to an estimated maximum of $1.4 billion over the three-year integration period.

     We recorded $160 million in net merger-related and restructuring expenses in the first six months of 2003. This included $166 million of expenses offset by $6 million in reversals of previously recorded restructuring expenses. The $166 million of expenses primarily related to systems conversions, and occupancy and equipment costs. Net merger-related and restructuring expenses also included $25 million of incremental advertising expense specifically related to merger activity such as branch conversions. We expect these advertising expenses to continue throughout the rest of the merger integration period in connection with branch conversions. We recorded $6 million of employee termination costs and displacement activity in the first six months of 2003.

     Since the consummation of the merger on September 1, 2001, $293 million of employee termination costs have been recorded representing approximately 3,700 employee terminations. Of the 3,700 employees, 46 percent were from staff support areas within the Parent, 21 percent were from the General Bank, 14 percent were from Capital Management, 12 percent were from the Corporate and Investment Bank, and 7 percent were from Wealth Management. Of the $293 million, $141 million was recorded as merger-related and restructuring expenses and $152 million was recorded as purchase accounting adjustments. Through June 30, 2003, we have paid $112 million in employee

10

termination costs recorded as merger-related and restructuring expenses and $135 million as purchase accounting adjustments, leaving $29 million and $17 million from the restructuring and purchase accounting accruals, respectively, for future payments.

     In the first six months of 2002, we recorded $135 million in merger-related and restructuring expenses primarily in connection with the Wachovia merger. This included $256 million of expenses offset by $121 million in gains from the sale of 27 First Union branch offices. These expenses consisted primarily of systems conversion, occupancy and equipment, and employee termination costs.

     In connection with the Wachovia Securities and Prudential Securities, Inc. retail brokerage combination, we project merger-related and restructuring expenses and exit cost purchase accounting adjustments of approximately $1.1 billion pre-tax over the anticipated 18-month integration period. We will also record fair value purchase accounting adjustments on Prudential’s contributed assets and liabilities.

Business Segments

     We provide a diversified range of banking and nonbanking financial services and products primarily through our four core business segments, the General Bank, Capital Management, Wealth Management and the Corporate and Investment Bank. The results for these four core business segments are presented excluding merger-related and restructuring expenses, and deposit base and other intangible amortization. This is the basis upon which we manage the operations of and allocate capital to our business segments, and therefore, is the basis upon which we present the profit measure of segment performance under GAAP. In addition, for segment reporting purposes, net interest income is presented to reflect tax-exempt interest income on a tax-equivalent basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a tax-equivalent basis is also used in determining the cash overhead efficiency ratios presented for each business segment. This ratio is calculated by dividing noninterest expense, excluding merger-related and restructuring expenses, and deposit base and other intangible amortization, by the sum of tax-equivalent net interest income and fee and other income.

     In addition, we use other financial segment profit measures such as Risk Adjusted Return on Capital (RAROC) and Economic Profit for purposes of making decisions about allocating resources to our various segments and assessing the performance of our segments. We believe this approach is consistent with the complexity of our businesses and that no single measure is adequate to measure segment performance; rather a range of segment performance measures that give a more complete financial picture is necessary and, in fact, used by our management to evaluate our segment performance. Because senior management uses these segment profit measures for this purpose, we believe investors may also find them useful in evaluating the financial performance and trends of our business segments.

     RAROC is calculated by dividing economic net income (reported net income adjusted for intangible amortization and the after-tax impact of expected losses) by economic capital (capital assigned based on a statistical assessment of the credit, market and operating risks taken to generate profits in a particular business unit or product).

     Economic Profit is calculated using cash operating earnings (net income available to common stockholders excluding the after-tax impact of special items and amortization of other intangibles), less a charge for the economic capital used to support the business. The charge for

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economic capital reflects the minimum return that stockholders should expect based on the capital asset pricing model. For 2003, we have calculated our cost of capital to be 11 percent.

     We continuously assess our assumptions, methodologies and reporting classifications to better reflect the true economics of our business segments. Business segment results for 2002 were restated to reflect several significant refinements that were incorporated for 2003. For example, in the first quarter of 2003, we incorporated cost methodology refinements to better align support costs to our business segments and product lines. The impact to segment earnings for full year 2002 as a result of these refinements was a $46 million decrease in the General Bank, a $25 million increase in Capital Management, a $4 million decrease in Wealth Management, a $3 million decrease in the Corporate and Investment Bank, and a $28 million increase in the Parent. In addition, we have realigned the lines of business of our Corporate and Investment Bank for internal management reporting purposes to better reflect the way we manage our corporate and investment banking businesses and to provide more clarity about the relative market sensitivity of these businesses. This realignment does not affect Corporate and Investment Bank combined results.

General Bank Performance Summary
		Three Months Ended					Six Months Ended
		June 30,					June 30,
(Dollars in millions)		2003			2002		2003		2002
Income statement data
Net interest income (Tax-equivalent)		$	1,812			1,720		3,556		3,370
Fee and other income			581			508		1,143		1,006
Intersegment revenue			45			42		88		82
	Total revenue (Tax-equivalent)		2,438			2,270		4,787		4,458
Provision for loan losses			99			98		204		213
Noninterest expense			1,324			1,252		2,621		2,483
Income taxes (Tax-equivalent)			371			337		716		643
	Segment earnings	$	644			583		1,246		1,119
Performance and other data
Economic profit		$	463			396		894		761
Risk adjusted return on capital (RAROC)			43.77	%		38.69		43.08		37.97
Economic capital, average		$	5,670			5,738		5,621		5,691
Cash overhead efficiency ratio (Tax-equivalent)			54.32	%		55.17		54.76		55.69
Lending commitments		$	63,712			54,806		63,712		54,806
Average loans, net			113,055			100,861		111,974		99,472
Average core deposits		$	151,166			139,650		148,347		137,878
FTE employees			36,935			37,094		36,935		37,094

General Bank The General Bank serves 8 million retail households and 900,000 small and middle-market businesses in 11 East Coast states and Washington, D.C., through 2,600 financial centers, 4,500 automated teller machines and online and telephone banking. Customized retail deposit and lending products include checking, savings and money market accounts, time deposits and IRAs, home equity, residential mortgage, student loans, credit cards and personal loans; and investment products include mutual funds and annuities. Retail banking includes services to small businesses with annual revenues up to $3 million. Business banking includes a full range of deposit, credit and investment products and services to businesses with annual revenues between $3 million and $15 million. Middle-market customers, typically with annual revenues between $15 million and $250 million, receive comprehensive commercial deposit, lending and commercial real estate solutions, as well as access to asset management, global treasury management and capital markets products and services through partnerships with Capital Management, Wealth Management, and the Corporate and Investment Bank.

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     Our strategic focus is on providing exceptional customer service combined with leveraging in-depth customer knowledge to acquire, deepen, enhance and retain customer relationships through tailored products and services. Our goal is to reduce the number of single-service customers and to increase the proportion of our customers who transact, save or invest, and borrow with us. The General Bank is particularly focused on providing excellent service to customers throughout the merger integration process, growing low-cost core deposits, and improving both loan spreads and efficiency.

     The General Bank segment includes Retail and Small Business, and Commercial. General Bank earnings increased $127 million in the first six months of 2003 from the first six months of 2002 due to higher consumer real estate-secured balances and strong growth in small business lending and core deposits.

     The rise in net interest income reflected 13 percent growth in average loans and 8 percent growth in average core deposits. Growth in low-cost core deposits was particularly strong at 19 percent from the first six months of 2002. Fee and other income rose due to mortgage-related revenue and strong debit card revenue.

     Noninterest expense increased 6 percent from the first six months of 2002, reflecting higher production-based costs such as incentives. Strong expense management and the realization of merger efficiencies were evident in an improved cash overhead efficiency ratio of 54.8 percent in the first six months of 2003, down from 55.7 percent in the first six months of 2002.

Capital Management Performance Summary
		Three Months Ended						Six Months Ended
		June 30,						June 30,
(Dollars in millions)		2003			2002			2003			2002
Income statement data
Net interest income (Tax-equivalent)		$	37			40			75			81
Fee and other income			800			788			1,535			1,571
Intersegment revenue			(16	)		(19	)		(35	)		(36	)
	Total revenue (Tax-equivalent)		821			809			1,575			1,616
Provision for loan losses			—			—			—			—
Noninterest expense			662			657			1,287			1,320
Income taxes (Tax-equivalent)			59			55			105			108
	Segment earnings	$	100			97			183			188
Performance and other data
Economic profit		$	81			77			145			149
Risk adjusted return on capital (RAROC)			56.72	%		54.67			53.23			52.94
Economic capital, average		$	710			710			694			716
Cash overhead efficiency ratio (Tax-equivalent)			80.74	%		81.18			81.69			81.68
Average loans, net		$	140			186			137			176
Average core deposits		$	1,338			1,269			1,353			1,283
FTE employees			12,428			13,345			12,428			13,345

Capital Management Capital Management has created a growing and diversified business with a balanced mix of products and multiple channels of distribution. Through these channels, we offer a full line of investment products and services, including retail brokerage services, fixed and variable annuities, defined benefit and defined contribution retirement services, mutual funds, other customized investment advisory services, and corporate and institutional trust services. With the July 1, 2003, consummation of the retail securities brokerage combination between Wachovia Securities, LLC, and Prudential Securities, Inc., these products and services are available through 12,000 registered representatives operating in our national retail brokerage network of 700 offices in 48 states and Washington, D.C.; full-service retail financial centers in our East Coast

13

marketplace; and online brokerage. Our 2003 third quarter financial reporting for this segment will include revenue and noninterest expense related to the retail securities brokerage firm created with that transaction. The Parent will reflect the impact of Prudential’s 38 percent interest in this transaction.

     Capital Management lines of business are Retail Brokerage Services, which includes the retail brokerage and insurance groups; and Asset Management, which includes mutual funds, customized investment advisory services, and corporate and institutional trust services.

     Capital Management earnings declined modestly in the first six months of 2003 compared with the first six months of 2002, due to weak equity markets over the past year. Total revenue reflected the impact of downward pressure on market valuations. Noninterest expense declined from the first six months of 2002, reflecting a continued focus on cost control.

     Assets under management increased $7 billion from December 31, 2002, to $240 billion at June 30, 2003, as equity markets improved and record net fluctuating fund sales offset money market outflows. Mutual fund assets of $115 billion were up 2 percent from year-end 2002 primarily due to strength in fixed income funds, including $2.4 billion in closed-end fund offerings in the first six months of 2003. Broker client assets of $282 billion at June 30, 2003, were up 7 percent from December 31, 2002, on improved market valuations.

Wealth Management Performance Summary
		Three Months Ended					Six Months Ended
		June 30,					June 30,
(Dollars in millions)		2003			2002		2003		2002
Income statement data
Net interest income (Tax-equivalent)		$	106			100		209		197
Fee and other income			131			137		264		272
Intersegment revenue			2			2		3		3
	Total revenue (Tax-equivalent)		239			239		476		472
Provision for loan losses			5			7		9		8
Noninterest expense			175			164		345		326
Income taxes (Tax-equivalent)			22			25		45		51
	Segment earnings	$	37			43		77		87
Performance and other data
Economic profit		$	25			33		52		63
Risk adjusted return on capital (RAROC)			36.35	%		47.24		38.59		46.66
Economic capital, average		$	384			360		378		355
Cash overhead efficiency ratio (Tax-equivalent)			73.62	%		68.73		72.67		69.22
Lending commitments		$	3,678			3,147		3,678		3,147
Average loans, net			9,558			8,632		9,449		8,517
Average core deposits		$	10,817			9,879		10,740		9,887
FTE employees			3,921			3,893		3,921		3,893

Wealth Management Wealth Management provides a comprehensive suite of private banking, trust and investment management, financial planning and insurance services primarily to high net worth individuals and families through 55 teams of relationship managers and product specialists. Strategic partnerships with the General Bank, Capital Management, and the Corporate and Investment Bank ensure that a comprehensive array of financial solutions is available to clients across the entire Wachovia franchise. Products and services offered through Wealth Management include cash management; online account aggregation, banking and bill payment; credit and debt management products; risk management services including insurance; investment management and advisory services including equity, fixed income and alternative investment services; financial, tax

14

and estate planning services; philanthropy management including charitable trusts, foundation and planned giving services; and legacy management including personal trust and estate settlement services.

     The decline in Wealth Management’s earnings from the first six months of 2002 primarily reflected lower fee income, due to market-driven declines in trust and investment management fees, and higher noninterest expense as discussed below. This decline was partially offset by higher insurance commissions resulting from the third quarter 2002 Cameron M. Harris & Co. acquisition. The increase in total revenue from the first six months of 2002 reflected higher net interest income on increased loans and deposits. The increase in noninterest expense from the first six months of 2002 was primarily due to the Cameron M. Harris acquisition and higher benefits expense.

     Steady loan and deposit production throughout the year drove average loans up 11 percent and average core deposits up 9 percent from the first six months of 2002. Loan growth was strongest in the commercial sector. Higher checking account and money market balances led deposit growth. Assets under management of $63 billion represented a modest increase from year-end 2002, driven by improving equity market valuations.

Corporate and Investment Bank Performance Summary
		Three Months Ended						Six Months Ended
		June 30,						June 30,
(Dollars in millions)		2003			2002			2003			2002
Income statement data
Net interest income (Tax-equivalent)		$	551			583			1,116			1,166
Fee and other income			578			495			1,149			993
Intersegment revenue			(29	)		(24	)		(55	)		(42	)
	Total revenue (Tax-equivalent)		1,100			1,054			2,210			2,117
Provision for loan losses			95			293			205			515
Noninterest expense			567			517			1,124			1,036
Income taxes (Tax-equivalent)			163			92			327			212
	Segment earnings	$	275			152			554			354
Performance and other data
Economic profit		$	126			76			253			145
Risk adjusted return on capital (RAROC)			19.37	%		15.18			19.25			14.89
Economic capital, average		$	6,042			7,277			6,191			7,507
Cash overhead efficiency ratio (Tax-equivalent)			51.62	%		49.14			50.87			48.95
Lending commitments		$	75,241			88,891			75,241			88,891
Average loans, net			34,608			41,580			35,352			42,456
Average core deposits		$	14,815			12,207			14,469			12,481
FTE employees			4,309			4,289			4,309			4,289

Corporate and Investment Bank Our Corporate and Investment Bank serves 2,600 domestic and international corporate clients typically with revenues in excess of $250 million, and primarily in 10 key industry sectors: healthcare; technology; media and communications; information technology and business services; financial institutions; real estate; consumer and retail; industrial growth; defense and aerospace; and energy and power.

     The Corporate and Investment Bank segment includes Corporate Lending, Investment Banking, Treasury and Trade Finance, and Principal Investing lines of business.

• Corporate Lending products and services include large corporate lending, loan syndications, and commercial leasing.

• Investment Banking products and services include equity capital markets, merger and acquisition advisory services, equity linked products and the

15

	activities of our fixed income division (including interest rate products, credit products, structured products and nondollar products).
•	Treasury and Trade Finance includes treasury management products and services, domestic and international correspondent banking operations, and international trade services.
•	Principal Investing includes direct investments primarily in private equity and mezzanine securities and investments in funds sponsored by select private equity and venture capital groups.

     Corporate and Investment Bank earnings increased 56 percent from the first six months of 2002 as an increase in fee income more than offset a decline in net interest income. Fee income improved largely due to across-the-board improvement in all fixed income product offerings and lower principal investing net losses of $101 million in the first six months of 2003 compared with net losses of $132 million in the first six months of 2002. Principal investing results largely reflected lower direct investment losses. Included in fee income was growth in trading account profits of 24 percent compared with the first six months of 2002. Trading account profit growth was driven by strong convertible bond and nondollar trading partially offset by higher credit default swap losses. Fee income also improved due to increased advisory and underwriting fees in fixed income and loan syndications. The decline in net interest income reflected lower balances in corporate lending.

     Average net loans declined 17 percent from the first six months of 2002 as a result of weak loan demand and lower credit facility usage, as well as portfolio management activity designed to reduce risk and to improve returns. Average core deposits increased 16 percent in the same period due to growth in commercial mortgage servicing and international trade finance.

     The provision for loan losses of $205 million included $43 million related to the sale or transfer to loans held for sale of $1.2 billion of exposure. The provision declined $310 million from the first six months of 2002, which was a period of higher net charge-offs primarily related to the telecommunications sector, Argentina and the energy services sector.

     The 8 percent increase in noninterest expense from the first six months of 2002 reflected strategic initiative spending, higher loans and lease costs, and increased revenue-based incentives.

     Principal investments, which are classified in other assets on our consolidated balance sheet, are recorded at fair value, with realized and unrealized gains and losses included in principal investing income in the results of operations. The carrying value of the principal investing portfolio at June 30, 2003, was $1.9 billion, consisting of $72 million in direct equity investments that are publicly traded, $475 million of direct investments in mezzanine securities (typically subordinated debt), $589 million of direct private equity investments and $789 million in private equity funds. The principal investing portfolio was $2.1 billion at year-end 2002.

     In the first six months of 2003, principal investing net losses were $101 million, consisting of $104 million in gross gains and $205 million in gross losses. Net losses were attributable to both our direct investment portfolio and our investments in private equity

16

funds, which accounted for $40 million and $61 million of net losses, respectively. Net losses for the first six months of 2002 were $132 million, which included $92 million in gross gains and $224 million in gross losses.

Parent Parent includes all of our asset and liability management functions, as well as:

• The goodwill and deposit base intangible assets, and related funding costs;

• Certain revenue items not recorded in the business segments discussed in the Fee and Other Income section;

• Certain expenses that are not allocated to the business segments;

• Branch sale gains and the results of The Money Store home equity lending, mortgage servicing, indirect auto leasing and credit card businesses that have been divested or are being wound down; and

• The results of our HomEq Servicing business, which is responsible for loan servicing for the former Money Store loans and home equity loans generated by our mortgage company, as well as servicing for third party portfolios.

     Earnings in the Parent were $99 million in the first six months of 2003 compared with $104 million in the first six months of 2002. Total revenue in the Parent declined $109 million from the first six months of 2002 to $357 million in the first six months of 2003 primarily as a result of a $50 million reduction in mortgage banking income. This decline was primarily related to increased deferral of loan origination fees from higher origination volume. Loan origination fees and costs are accounted for on a cash basis in the core business segments and the Parent includes an adjustment to defer and amortize the fees and costs over the life of the loan. In addition, advisory fees in the first six months of 2002 included an incremental $42 million related to the securitization of assets from one of our multi-seller commercial paper conduits. Trading losses of $23 million in the first six months of 2003 included a $31 million loss related to liquidity agreements we have with the conduits that we administer. Trading losses of $18 million in the first six months of 2002 included a $42 million loss related to the purchase of $361 million of assets from the conduit pursuant to a credit enhancement agreement we had with the conduit.

     Noninterest expense declined by $25 million from the first six months of 2002 primarily due to lower deposit base intangible amortization. Income tax benefits increased $80 million from the first six months of 2002 reflecting a slightly lower corporate effective tax rate. For segment reporting, income tax expense or benefit is allocated to each business segment, and any difference between the total for all business segments and the consolidated results is included in the Parent.

     Our 2003 third quarter financial reporting for this segment will reflect the impact of Prudential’s 38 percent interest in this transaction. Fee income and noninterest expense related to this transaction will be included in Capital Management.

Balance Sheet Analysis

Securities The securities portfolio, all of which is classified as available for sale, consists primarily of U.S. Government agency and asset-backed securities. Activity in this portfolio is undertaken primarily to manage liquidity, interest rate risk and regulatory capital, and to take advantage of market conditions that create more economically attractive returns on

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these investments. We had securities available for sale with a market value of $74 billion at June 30, 2003, a decline from $76 billion at December 31, 2002. Securities available for sale had an unrealized gain of $2.8 billion at June 30, 2003, and $2.7 billion at December 31, 2002. The average rate earned on securities available for sale was 5.67 percent in the first six months of 2003 and 6.58 percent in the first six months of 2002.

     In connection with certain securitizations, we retain interests in the form of either bonds or residual interests. The retained interests resulted primarily from the securitization of residential mortgage loans and prime equity lines. Included in securities available for sale at June 30, 2003, were residual interests with a market value of $1.3 billion, which included an unrealized gain of $567 million, and retained bonds from securitizations in U.S. Government agency and asset-backed securities with a market value of $13.5 billion, which included a net unrealized gain of $459 million. At December 31, 2002, securities available for sale included residual interests with a market value of $1.3 billion, which included a net unrealized gain of $491 million and retained bonds from securitizations with a market value of $18 billion, which included a net unrealized gain of $649 million.

     At June 30, 2003, retained bonds with an amortized cost of $9.9 billion and a market value of $10.2 billion were rated as investment grade by external rating agencies. Retained bonds with an amortized cost of $9.2 billion and a market value of $9.5 billion at June 30, 2003, have external credit ratings of AA and above.

     The decrease in retained interests in securities available for sale from December 31, 2002, was primarily due to pay-downs in retained bonds.

Loans — On-Balance Sheet
		2003				2002
		Second		First		Fourth		Third		Second
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
Commercial
Commercial, financial and agricultural		$	54,857		56,476		56,501		57,899		57,984
Real estate — construction and other			6,827		6,833		6,849		7,558		8,035
Real estate — mortgage			16,153		16,429		16,655		16,967		17,349
Lease financing			23,204		23,060		22,667		22,616		22,044
Foreign			6,622		6,433		6,425		6,992		7,241
	Total commercial		107,663		109,231		109,097		112,032		112,653
Consumer
Real estate — mortgage			25,564		25,288		24,979		17,527		19,803
Installment loans			39,577		39,748		38,817		37,889		35,940
Vehicle leasing			13		35		80		43		168
	Total consumer		65,154		65,071		63,876		55,459		55,911
	Total loans		172,817		174,302		172,973		167,491		168,564
Unearned income			9,984		10,080		9,876		9,949		9,764
	Loans, net (on-balance sheet)	$	162,833		164,222		163,097		157,542		158,800
Loans — Managed Portfolio (Including on-balance sheet)
		2003				2002
		Second		First		Fourth		Third		Second
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
Commercial		$	111,071		113,038		112,455		115,591		115,750
Real estate — mortgage			32,207		32,664		34,246		27,666		26,951
Installment loans			66,646		66,348		65,280		65,260		64,469
Vehicle leasing			13		35		80		43		168
	Total managed portfolio	$	209,937		212,085		212,061		208,560		207,338

Loans Net loans declined modestly from December 31, 2002, primarily due to a decline in large corporate loans related to sales, securitizations and transfers to loans held for sale, offset by the purchase of $2.8 billion of primarily residential mortgage loans for investment purposes. In the first six months of 2003, we transferred to loans held for sale or sold $906

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million of loans, largely from the large corporate portfolio, compared with transfers or sales of $861 million in the first six months of 2002. Commercial loans represented 62 percent and consumer loans 38 percent of the loan portfolio at June 30, 2003.

     The managed loan portfolio includes the on-balance sheet loan portfolio, loans securitized for which the assets are classified in securities on-balance sheet, loans held for sale that are classified in other assets on-balance sheet and the off-balance sheet portfolio of securitized loans sold where we service the loans. The average rate earned on loans decreased 74 basis points from the first six months of 2002 to 5.15 percent in the first six months of 2003, which was in line with reductions in interest rates.

Asset Quality
		2003						2002
		Second			First			Fourth			Third			Second
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
Nonperforming assets
Nonaccrual loans		$	1,501			1,622			1,585			1,751			1,805
Foreclosed properties			130			118			150			156			156
	Total nonperforming assets	$	1,631			1,740			1,735			1,907			1,961
as % of loans, net and foreclosed properties			1.00	%		1.06			1.06			1.21			1.23
Nonperforming assets in loans held for sale		$	167			114			138			115			108
	Total nonperforming assets in loans and in loans held for sale	$	1,798			1,854			1,873			2,022			2,069
as % of loans, net, foreclosed properties and loans in other assets as held for sale			1.04	%		1.08			1.11			1.23			1.24
Allowance for loan losses
Balance, beginning of period		$	2,747			2,798			2,847			2,951			2,986
Net charge-offs			(169	)		(195	)		(199	)		(224	)		(374	)
Allowance relating to loans transferred or sold			(69	)		(80	)		(158	)		(315	)		(58	)
Provision for loan losses related to loans transferred or sold			26			25			109			211			23
Provision for loan losses			169			199			199			224			374
Balance, end of period		$	2,704			2,747			2,798			2,847			2,951
as % of loans, net			1.66	%		1.67			1.72			1.81			1.86
as % of nonaccrual and restructured loans (a)			180			169			177			163			163
as % of nonperforming assets (a)			166	%		158			161			149			150
Net charge-offs		$	169			195			199			224			374
Commercial, as % of average commercial loans			0.42	%		0.53			0.53			0.61			1.24
Consumer, as % of average consumer loans			0.44			0.44			0.52			0.56			0.48
Total, as % of average loans, net			0.43	%		0.49			0.52			0.59			0.97
Past due loans, 90 days and over
Commercial, as a % of loans, net			1.30	%		1.41			1.42			1.58			1.62
Consumer, as a % of loans, net			0.80	%		0.79			0.75			0.77			0.69
(a) These ratios do not include nonperforming assets included in other assets as held for sale.

Nonperforming Assets The 4 percent decline in nonperforming assets from December 31, 2002, reflected more favorable market conditions and a slowdown in new inflows to the commercial nonaccrual portfolio as well as $115 million in loan sales directly from the loan portfolio. Nonperforming assets were also reduced by net charge-offs, write-downs in the loans held for sale portfolio and sales of $53 million in nonperforming assets in assets held for sale.

Impaired Loans Impaired loans, which are included in nonperforming loans, amounted to $1.2 billion at June 30, 2003, and $1.4 billion at December 31, 2002. Included in the allowance for loan losses at June 30, 2003, was $134 million related to $513 million of impaired loans. The remaining impaired loans were recorded at the lower of either the fair value of collateral or the present value of expected future cash flows. In the first six months of 2003, the average recorded investment in impaired loans was $1.3 billion, and $9 million of interest income was recognized on impaired loans. This income was recognized using the cash-basis method of accounting.

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Past Due Loans Accruing loans 90 days or more past due, excluding loans that are classified as loans held for sale, were $293 million at June 30, 2003. Of these past due loans, $18 million were commercial loans or commercial real estate loans and $275 million were consumer loans.

Net Charge-offs Net charge-offs declined 48 percent from the first six months of 2002, due mainly to moderating trends in nonperforming assets and our strategic decision to actively manage down potential problem loans and certain large corporate loans over the past several quarters. We expect net charge-offs to be in the range of 40 basis points to 50 basis points of average loans for the full year 2003.

Provision and Allowance for Loan Losses The provision for loan losses declined 43 percent from the first six months of 2002. We continue to mitigate risk and strengthen our balance sheet by transferring many at-risk credits to loans held for sale. The provision for loan losses in the first six months of 2003 included $51 million associated with the transfer of $625 million of exposure, including $386 million of outstandings and the related unfunded commitments of $239 million, to loans held for sale and to the sale of $444 million of corporate, commercial and consumer loans directly out of the loan portfolio. The provision for loan losses in the first six months of 2002 included $37 million related to $861 million of loans sold directly out of the loan portfolio or transferred to loans held for sale. The provision related to the transfer of loans to loans held for sale was recorded to reduce the carrying value of these loans to their respective fair values.

Loans Held for Sale Loans held for sale include loans originated for sale or securitization as part of our core business strategy as well as the activities related to our ongoing portfolio risk management to reduce exposure to areas of perceived higher risk.

     In the first six months of 2003, we sold or securitized $13.1 billion in loans out of the held for sale portfolio. Of the $13.1 billion, $1.3 billion were commercial loans and $11.8 billion were consumer loans, primarily residential mortgages and prime equity lines. Substantially all of these loan sales and securitizations represented normal flow, or core business, activity, which means we originate the loans with the intent to sell them to third parties. Of the loans sold, $53 million were nonperforming.

     As part of our ongoing portfolio management activities, we transferred $386 million of commercial loans and $239 million of additional exposure to held for sale in the first six months of 2003. In connection with this transfer to loans held for sale, these loans were written down to the lower of cost or market value, and in the aggregate these loans were recorded in loans held for sale at 72 percent of their original face value.

     In the first six months of 2003, we also sold $444 million of loans directly out of the loan portfolio. Of these nonflow loans, $329 million were performing and $115 million were nonperforming at the time of the sale. Loan sales are recorded as sales directly out of the loan portfolio in situations where the sale is closed in the same period in which the decision to sell was made. We will continue to look for market opportunities to reduce risk in the loan portfolio by either selling loans directly out of the loan portfolio or by transferring loans to loans held for sale.

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Funding Sources

Core Deposits Deposits are our primary source of funding. We are one of the nation’s largest core deposit-funded banking institutions with a deposit base that is spread across the economically strong South Atlantic region and high per-capita income Middle Atlantic region. We believe this geographic diversity creates considerable funding diversity and stability. The stability of this funding source is affected by other factors including returns available to customers on alternative investments, the quality of customer service levels and competitive forces. Core deposits include savings, negotiable order of withdrawal (NOW), money market, noninterest-bearing and other consumer time deposits. Core deposits increased 7 percent from December 31, 2002, to $187 billion. Average low-cost core deposits, which exclude consumer certificates of deposit and deposits held in CAP Accounts, grew 18 percent to $133 billion in the first six months of 2003 from the first six months of 2002 as we focused on increasing the proportion of low-cost core deposits over higher cost consumer certificate of deposit balances.

     In the first six months of 2003 and 2002, average noninterest-bearing deposits were 24 percent and 23 percent, respectively, of average core deposits. The portion of core deposits in higher rate, other consumer time deposits was 16 percent at June 30, 2003, and 19 percent at December 31, 2002. Other consumer time and other noncore deposits usually pay higher rates than savings and transaction accounts, but they generally are not available for immediate withdrawal. They are also less expensive to service.

Purchased Funds Average purchased funds, which include wholesale borrowings with maturities of 12 months or less, were $60 billion in the first six months of 2003 and $54 billion in the first six months of 2002. Purchased funds were $63 billion at June 30, 2003, and $57 billion at December 31, 2002.

Long-Term Debt Long-term debt declined $2.6 billion from December 31, 2002, to $37 billion at June 30, 2003, due to scheduled maturities. In the rest of 2003, scheduled maturities of long-term debt amount to $1.1 billion. We anticipate either extending the maturities of these obligations or replacing the maturing obligations.

     Long-term debt included $3 billion of trust preferred securities at both June 30, 2003, and December 31, 2002. Subsidiary trusts issued these preferred securities and used the proceeds to purchase junior subordinated debentures from the Parent. These preferred securities are considered tier 1 capital for regulatory purposes. The Accounting and Regulatory Matters section has additional information.

     Wachovia Bank has available a global note program for the issuance of up to $45 billion of senior or subordinated notes. In July 2003, we issued $500 million in subordinated bank notes under this program. The sale of any notes under this program will depend on future market conditions, funding needs and other factors.

     Under a current shelf registration statement with the Securities and Exchange Commission, we have $10 billion of senior or subordinated debt securities, common stock or preferred stock available for issuance. In July 2003, we issued $750 million in senior debt securities under this shelf registration. In addition, we have available for issuance up to $4 billion under a medium-term note program covering senior or subordinated debt securities. The sale of debt or equity securities will depend on future market conditions, funding needs and other factors.

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Stockholders’ Equity The management of capital in a regulated banking environment requires a balance between optimizing leverage and return on equity while maintaining sufficient capital levels and related ratios to satisfy regulatory requirements. Our goal is to generate attractive returns on equity to our stockholders while maintaining sufficient regulatory capital ratios.

     Stockholders’ equity was essentially unchanged from year-end 2002 at $32 billion at June 30, 2003. Average diluted common shares outstanding declined by 24 million shares from June 30, 2002, to 1.3 billion diluted common shares at June 30, 2003. We repurchased 8.9 million common shares at a cost of $347 million in the first six months of 2003 in connection with our previously announced buyback program. At June 30, 2003, we had authority to repurchase up to 88.8 million shares of our common stock.

     In the first six months of 2003, we settled our remaining equity forward purchase contract by purchasing 24 million shares at a cost of $773 million.

     In the third quarter of 2002, we entered into transactions involving the simultaneous sale of put options and the purchase of call options on 4.9 million shares of our common stock with expiration dates from late October 2003 to mid-November 2003. We entered into these collar transactions to manage the potential dilution associated with employee stock options. The put options were sold to offset the cost of purchasing the call options. Beginning on July 1, 2003, the accounting treatment for the collars changed. The Accounting and Regulatory Matters section has further information.

     We paid $740 million in dividends to common stockholders in the first six months of 2003 and $656 million in the first six months of 2002. This represented a dividend payout ratio on cash earnings of 31.79 percent in the first six months of 2003 and 32.00 percent in the first six months of 2002. Dividends of 5 cents per DEP share, or $5 million, were paid to holders of the DEPs in the first six months of 2003, representing the difference between the Wachovia dividends paid to common stockholders in the first six months of 2003 of 55 cents per share and the last common stock dividend paid by the former Wachovia of $1.20 per share on an annualized basis.

Subsidiary Dividends Wachovia Bank is the largest source of subsidiary dividends paid to the Parent. Capital requirements established by regulators limit dividends that this subsidiary and certain other of our subsidiaries can pay. Under these and other limitations, which include an internal requirement to maintain all deposit-taking banks at the well capitalized level, at June 30, 2003, our subsidiaries had $4.2 billion available for dividends that could be paid without prior regulatory approval. Our subsidiaries paid $1.3 billion in dividends to the Parent in the first six months of 2003.

Regulatory Capital As a regulated financial services company, we are governed by certain regulatory capital requirements. Our tier 1 capital ratio increased 11 basis points from December 31, 2002, to 8.33 percent at June 30, 2003. Our objective for 2003 is to maintain a tier 1 capital ratio in the range of 8.25 percent to 8.35 percent. The minimum tier 1 ratio is 4 percent. At June 30, 2003, we were classified as well capitalized for regulatory purposes, the highest classification. Our total capital and leverage ratios were 11.92 percent and 6.78 percent, respectively, at June 30, 2003, and 12.01 percent and 6.77 percent, respectively, at December 31, 2002.

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Off-Balance Sheet Transactions

     In the normal course of business, we engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk. These transactions fall under two broad categories: corporate transactions and customer transactions. Corporate transactions are designed to diversify our funding sources; reduce our credit, market or liquidity risk; and optimize capital. Customer transactions are executed to facilitate customers’ funding needs or risk management objectives. Within these two categories, there are many types of transactions, which for purposes of the following table, we have grouped into lending commitments, conduit transactions, asset securitizations, other credit enhancements, leasing, and other transactions. For a detailed description of each of these types of transactions, please refer to our 2002 Annual Report on Form 10-K. Off-balance sheet exposure did not change significantly from December 31, 2002, to June 30, 2003, with the exception of the items noted in the following quarterly update to the information provided in the Annual Report on Form 10-K.

Summary of Off-Balance Sheet Exposures
		Business Segments								Total
						Corporate
						and
		General		Wealth		Investment				June 30,		December 31,
(In millions)		Bank		Management		Bank		Parent		2003		2002
Lending commitments
Commercial		$	23,966		2,300		61,928		16,091		104,285		111,058
Letters of credit			3,014		—		13,204		—		16,218		14,878
Consumer			36,732		1,378		—		—		38,110		32,084
	Total lending commitments		63,712		3,678		75,132		16,091		158,613		158,020
Conduit transactions			—		—		17,481		—		17,481		17,604
Asset securitizations			—		—		3,886		8,152		12,038		12,857
Other credit enhancements			7,057		—		4,233		—		11,290		11,023
Leasing transactions			—		—		645		—		645		595
Other transactions
Principal investing			—		—		853		—		853		972
Transactions in our own stock			—		—		—		151		151		1,155
Contingent consideration			—		—		—		276		276		281
	Total	$	70,769		3,678		102,230		24,670		201,347		202,507

Lending Commitments Lending commitments include unfunded loan commitments and letters of credit. From December 31, 2002, commercial loan commitments declined $6.8 billion consistent with the decrease in commercial loans as a result of our commercial portfolio management activity designed to reduce risk. Consumer loan commitments increased $6.0 billion in line with the increase in consumer loan activity.

Conduit Transactions In the first six months of 2003, we purchased $306 million of assets from the conduits we administered and recorded $31 million in losses related to liquidity agreements we have with the conduits that we administer. In the first six months of 2002, we purchased $596 million of assets from the conduits we administered, and incurred $42 million in losses. The Accounting and Regulatory Matters section has additional information.

Asset Securitizations and Other Credit Enhancements In the first six months of 2003, we securitized and sold $1.1 billion of prime equity lines, retaining $26 million in the form of residual interests. Included in other income were gains related to these securitizations of $46 million in the first six months of 2003 and $65 million in the first six months of

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2002. Retained interests from securitizations, recorded as either available for sale securities, trading account assets, loans or other assets, were $17 billion at June 30, 2003, and $20 billion at December 31, 2002.

     Retained interests from collateralized loan obligation (CLO) and collateralized debt obligation (CDO) transactions are recorded as available for sale securities and were $136 million at June 30, 2003, and $151 million at December 31, 2002. Impairment losses included in other income related to retained interests in CLOs and CDOs were $23 million in the first six months of 2003 and $34 million in the first six months of 2002.

     Retained interests from securitizations of fixed rate municipal bonds were $316 million at June 30, 2003, and $318 million at December 31, 2002.

Leasing Transactions In December 2002, we entered into a sale and leaseback transaction with a large financial institution under which we committed to sell $1.3 billion of railcars and lease them back over a six-year period. In December 2002, we sold $600 million of railcars and leased them back. The remaining railcars were sold and leased back in the first quarter of 2003. The purchaser/lessor financed the purchase through the issuance of nonrecourse debt to independent third parties. No gain or loss was recorded on these transactions.

     Total assets within off-balance sheet lease structures were $1.6 billion at June 30, 2003, compared with $876 million at December 31, 2002. At June 30, 2003, assets of $843 million have been classified as capital leases; accordingly, the present value of the minimum lease payments, including the present value of the maximum residual guarantee at the end of the lease term, has been recorded as a capital asset and as long-term debt.

     We provided $1.4 billion in residual value guarantees to the lessors at June 30, 2003, with $645 million representing assets under operating leases. The residual value guarantees protect the lessor from loss on sale of the property at the end of the lease term. To the extent that a sale results in proceeds less than a stated percent (generally 80 percent to 89 percent) of the property’s cost less depreciation, we will be required to reimburse the lessor under our residual value guarantee.

Principal Investing Principal Investing investments were recorded on the balance sheet at a fair value of $1.9 billion at June 30, 2003, and $2.1 billion at December 31, 2002. These investments are subject to all the risks of the equity markets and many of these investments are illiquid. Direct investments in public and private companies typically do not involve legally binding commitments to participate in subsequent equity or debt offerings. Fund investments do however involve legally binding commitments to contribute capital pursuant to the terms of limited partnership agreements. At June 30, 2003, we had unfunded commitments to more than 200 fund sponsors amounting to $853 million. We expect that these commitments will be drawn over the next three to five years.

Transactions in Our Own Stock Since 1999 we have entered into derivative transactions in our own stock, including forward purchase contracts and equity collars. In the first six months of 2003, we settled our remaining forward purchase contract by purchasing 24 million shares at a cost of $773 million. In addition, we use equity collars to offset potential dilution from the exercise of stock options. Under the collar transactions, we purchased a call option and sold a put option to the same counterparty. We have the option to settle these contracts by purchasing the shares for cash or by settling on a net cash or net share basis. If we settle the contracts by purchasing the shares, we will pay cash and realize a corresponding reduction to

24

stockholders’ equity. Net cash and net share settlement would involve a counterparty selling the shares they hold, with the remaining obligation settled in cash or shares, respectively. Depending on the market price of our stock relative to the price of the contracts at settlement, we may either receive or pay cash or issue shares under net settlement.

Risk Governance and Administration

     Please refer to our 2002 Annual Report on Form 10-K for a more detailed discussion of our comprehensive approach to managing credit, operational and liquidity risks, and to allocating capital and measuring risk-adjusted returns as well as our governance structure and practices.

Market Risk Management We trade a variety of equities, debt securities, foreign exchange instruments and derivatives in order to provide customized solutions for the risk management needs of our customers and for proprietary trading. Risk is controlled through the use of Value-at-Risk (VAR) methodology with limits approved by the Asset and Liability Management Committee and an active, independent monitoring process. Our 1-day VAR limit for the first six months of 2003 was $30 million.

     The VAR methodology uses recent market volatility to estimate within a given level of confidence the maximum trading loss over a period of time that we would expect to incur from an adverse movement in market rates and prices over the period. We calculate 1-day VAR at the 97.5 percent confidence level. The VAR model uses historical data from the most recent 252 trading days. The VAR model is supplemented by stress testing on a daily basis. The analysis captures all financial instruments that are considered trading positions. The total 1-day VAR was $17 million at June 30, 2003, and $13 million at December 31, 2002, and primarily related to interest rate risk and equity risk. The high, low and average VARs in the first six months of 2003 were $19 million, $10 million and $13 million, respectively.

Interest Rate Risk Management Managing interest rate risk is fundamental to banking. The Asset and Liability Management Committee oversees the interest rate risk management process and approves policy guidelines. Balance sheet management and finance personnel monitor the day-to-day exposure to changes in interest rates in response to loan and deposit flows. They make adjustments within established policy guidelines as needed to manage overall risk exposure.

     The sensitivity of our net interest income to changes in interest rates can be broadly divided into two major categories: repricing risk and curve risk. Repricing risk reflects the impact of changes in short-term interest rates such as federal funds, LIBOR and the prime rate on variable rate assets and liabilities, and on interest rate derivatives. Curve risk captures the impact of changes in rates greater than one year in term on existing assets and liabilities, as well as new fixed rate loans, securities and debt. The largest impact from curve risk is a prepayment-related change in the cash flows of mortgage-related assets.

     A balance sheet is described as liability sensitive when in the aggregate its liability costs reprice more frequently or to a greater degree than its aggregate asset yields for a given change in interest rates. A liability-sensitive balance sheet will produce a lower level of net interest income in a rising rate scenario compared with a scenario where rates remain unchanged, as interest expense will increase faster than interest income. Conversely, an

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asset-sensitive balance sheet, in which asset yields reprice faster or to a greater extent than liabilities, would produce greater net interest income in a rising rate scenario. The opposite relationship holds true for a scenario in which interest rates decline.

     Our large and relatively rate-insensitive deposit base funds a portfolio of primarily floating rate commercial and consumer loans. This mix creates a highly asset-sensitive balance sheet. Over the last 12 to 18 months, deposit growth has far outpaced growth in loans, thus significantly adding to our asset-sensitive position. To convert the risk profile of the balance sheet to a neutral or liability sensitive position, a large portfolio of fixed rate discretionary instruments such as loans, securities and derivatives must be added. As part of our interest rate risk and liquidity management process, we may elect to use derivatives as a cost- and capital-efficient way to hedge on-balance sheet assets, liabilities and future transactions. The decision to use derivatives or investment securities as a part of our interest rate risk and liquidity management process is based on a number of factors, including perceived relative value, liquidity and capital implications, transaction efficiency and overall strategy. We will opt to use derivatives when they provide greater relative value or more efficient execution of our strategy than cash securities. Derivatives used for interest rate risk management include various interest rate swaps, futures, forward and option structures with indices that relate to the pricing of specific financial instruments. Our 2002 Annual Report on Form 10-K has additional information related to derivatives.

     As loan demand increases, low-cost core deposits may be used to fund lending activities. To the extent such loans are fixed rate, the need for discretionary investment securities would be diminished. Accordingly, existing positions would be allowed to mature, or may be liquidated. To the extent incremental loan assets are variable rate instruments, it is likely that fixed rate securities would be allowed to mature or be liquidated and new derivatives would be added to effectively convert the incremental variable rate loans to fixed rate instruments. These activities keep liquidity, capital, and interest rate profiles at targeted levels.

     Our investment strategy and our use of mortgage-related assets are dependent on many factors such as the current risk profile of the balance sheet and expected economic conditions. In June 2003, mortgage-related assets comprised roughly 70 percent of the discretionary loan and securities portfolios, and 55 percent of all discretionary positions. Discretionary mortgage-related assets include domestic agency mortgage-backed securities, collateralized mortgage obligations (CMOs), foreign mortgage-backed securities, and purchased fixed and adjustable rate loans.

     Most mortgage loans provide borrowers with an option to repay a loan before its contractual maturity without penalty. This prepayment option exposes mortgage lenders and investors to curve risk, i.e., the risk that expected cash flows are altered as a result of changes in interest rates with terms longer than one year. In a declining rate environment, this option allows borrowers to refinance their loans with a new, lower rate mortgage, therefore shortening the expected average life of the original loan. A rising rate environment, however, reduces refinancing opportunities, therefore extending the expected timeframe over which these loans will be outstanding, i.e., they have longer expected average lives.

     Mortgage-related assets possess unique risk profiles due to the optional nature of their cash flows. We seek to optimize our investment decisions by considering how these assets perform in a variety of conditions. The price at which mortgage assets are purchased has a significant impact on their yield performance in different rate

26

environments. We use mortgage securities purchased at a premium as a partial hedge against rising rates, and mortgage securities purchased at par or discount prices to partially hedge falling rates.

     Securities purchased at par have very stable yields in all rate environments. In a more typical rate environment, normal rate volatility offers future refinancing opportunities. Loans issued at historically low rates during the second quarter of 2003 are expected to have significantly fewer refinancing opportunities than those issued in a more normal rate environment. As a result, securities collateralized by these loans should have significantly longer expected average lives. Securities with longer expected average lives have a higher level of risk to rising rates than securities with shorter average lives. We selectively include current coupon mortgage securities in our portfolio as a hedge against a continued low-rate environment.

     When mortgage securities are purchased at a premium, the amortization of the premium can cause increases or decreases in the yield of the securities, depending upon the rate environment. In the second quarter 2003 rate environment, higher coupon, premium mortgage securities had increased risk of prepayment; therefore, their expected lives were very short, and yield performance was quite low. In the rising rate environment we have experienced since the end of the second quarter of 2003, the extension of these higher coupon cash flows has caused the yield of securities purchased at a premium to perform much better than securities purchased at par. This yield dynamic serves as a partial hedge against rising rates, and permits a fixed-rate, premium security to perform similar to a floating rate security given moderate increases in long-term rates.

     Mortgage securities purchased at discount are collateralized by loans with interest rates lower than the interest rates on newly originated mortgages. The underlying loans would have longer expected average lives than the loans collateralizing securities purchased at par, therefore possessing a higher level of risk to rising rates. In the normal course of interest rate risk management, we routinely invest in discount securities as a hedge against declining rates. Due to the historically low second quarter 2003 rate levels, virtually all mortgage securities were priced at par or above. As a result, we have chosen to purchase interest rate floors in the derivatives market as an efficient way to provide protection against declining rates.

     The following table provides information on the relative performance of mortgage-related assets purchased at par, premium and discount prices.

Relative Investment Yield
	Rising Rates	Current Rates	Declining Rates
Mortgage securities purchased at par	Stable	Stable	Stable
Mortgage securities purchased at a premium	Higher	Lower	Lower
Mortgage securities purchased at a discount	Lower	Moderate	Higher

     To counterbalance the risks inherent in investing in mortgage-backed securities, we maintain a diversified portfolio of assets with differing risk profiles. Assets such as highly rated commercial mortgage-backed securities are structured with prepayment protection and therefore they have more certain cash flows. At June 2003, this asset class makes up about 10 percent of our portfolio. We have also achieved yield curve diversification by making investments in highly rated foreign denominated securities reflecting the characteristics of the European economic conditions. We take no currency risk when we invest in foreign securities.

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     In analyzing interest rate sensitivity for policy measurement, we compare our forecasted earnings per share in both a “high rate” and “low rate” scenario to base-line scenarios. Our base-line scenario (“most likely rate”) is our estimated most likely path for future short-term interest rates over the next 24 months. A second base-line scenario (“flat rate”) holds short-term rates flat at their current level over our forecast horizon. The “high rate” and “low rate” scenarios assume gradual 200 basis point increases or decreases in the federal funds rate from the beginning point of each base-line scenario over the next 12-month period. Our policy limit for the maximum negative impact on earnings per share resulting from “high rate”, “low rate” or “base line” scenarios is 5 percent. The policy measurement period is 12 months in length, beginning with the first month of the forecast.

     The market risk associated with interest rate risk management derivatives is fully incorporated into our earnings simulation model in the same manner as on balance sheet financial instruments. The market risk associated with trading and customer derivative positions is managed using the VAR methodology, as described in the Market Risk Management section.

Earnings Sensitivity Our “flat rate” scenario holds the federal funds rate constant at 0.85 percent through May 2004. Based on our June 2003 outlook, if interest rates were to follow our “high rate” scenario (i.e., a 200 basis point increase in short-term rates from our “flat rate” scenario), our earnings sensitivity model indicates earnings during the 12- month policy measurement period would increase by 0.2 percent. Typically, we analyze a 200 basis point decline for our “low rate” scenario. However, because of the current federal funds rate level, we believe a 50 basis point decline in rates is more appropriate. If rates were to follow the “low rate” scenario relative to “flat rates,” earnings would increase by 0.2 percent.

     Periodically, factors such as yield curve shape, and how it changes over the measurement period have a more pronounced effect on sensitivity than a change in short-term rates. The “flat rate” scenario holds the curve shape, and shocks the curve in by adjusting each point of the curve by 200 basis points. Currently, the “high rate” scenario as measured against “flat rates,” maintains a relatively steep curve over the measurement period. This scenario indicates how curve shape, namely a steeper curve, offsets the effects of rising short-term rates. For our “most likely rate” scenario, we believe the market forward implied rate (“market rate”) is the most appropriate. This scenario assumes the federal funds rate declines to 0.79 percent in the fourth quarter of 2003, remains at that level through February 2004, then gradually rises to 0.97 percent by the end of the second quarter of 2004. The current yield curve is quite steep by historical standards. A steepening of the yield curve typically has a mitigating effect on rate sensitivity as short-term rates rise; conversely, a flattening of the yield curve exacerbates the impact of rising rates on Wachovia’s liability sensitive balance sheet. Our “most likely” rate scenario anticipates a flattening of the yield curve over the next 12 months.

     Our sensitivity to the “market rate” scenario is measured using three different yield curve shapes. The first is a gradual 200 basis point increase at each point on the yield curve over a 12-month period. This would be referred to as a parallel shift in the curve and would follow the “market rate” scenario’s expected flattening. Next we measure the exposure to nonparallel shifts by allowing short-term rates to rise by 200 basis points, while rates of terms longer than one year increase by a lesser degree. This scenario creates an incrementally flatter curve. In a liability sensitive balance sheet, this has the impact of stressing liability costs by a full 200 basis points, while new fixed-rate lending and

28

investment rates receive less than a 200 basis point increase. There are two scenarios of this type that measure the impact of successively flatter curves. The reported sensitivity figure is a composite of these three scenarios.

     Our model indicates that earnings would be negatively affected by 1.2 percent in a “high rate” scenario relative to the market rate over the policy period. Additionally, we measure a scenario where rates gradually decline 50 basis points over a 12-month period relative to the “most likely rate” scenario. The model indicates that earnings would be positively affected in this scenario by 0.2 percent. While our interest rate sensitivity modeling assumes that management takes no action, we regularly assess the viability of strategies to reduce unacceptable risks to earnings and we implement such strategies when we believe those actions are prudent. As new monthly outlooks become available, we formulate strategies aimed at protecting earnings from the potential negative effects of changes in interest rates.

Accounting and Regulatory Matters

     The following information addresses new or proposed accounting pronouncements related to our industry as well as new or proposed legislation that will continue to have a significant impact on our industry.

Qualifying Special-Purpose Entities In June 2003, the FASB issued a proposed statement, Qualifying Special-Purpose Entities and Isolation of Transferred Assets. The proposed statement would amend SFAS 140 to provide additional restrictions on the permitted activities of qualifying special-purpose entities, including additional restrictions on the transactions a qualifying special-purpose entity could enter into with the transferor. The provisions of the proposed statement would apply prospectively to new transactions and would also apply to existing qualifying special-purpose entities in certain circumstances. We are assessing the potential impact that the proposed statement would have on us, which could result in consolidation of certain qualifying special-purpose entities that are currently not included in our consolidated financial statements. We will not know the actual impact until the FASB finalizes the proposed statement.

Liabilities and Equity In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity (SFAS 150). SFAS 150 requires that the fair value of certain financial instruments where the issuer may settle the instrument by issuing its own equity shares be classified as assets or liabilities. Subsequent changes to fair value are recorded in earnings. We have equity collar transactions that expire in October through December 2003 and are considered financial instruments within the scope of SFAS 150. In connection with the adoption of SFAS 150 on July 1, 2003, we recorded the fair value of these instruments as an asset and recognized after-tax income of $16 million ($25 million before tax), which will be presented in the third quarter 2003 consolidated statement of income as the cumulative effect of changing our method of accounting for certain transactions in our own stock. Other than recording this cumulative effect, the adoption of SFAS 150 did not have a material impact on our consolidated financial position or results of operations. The future impact of SFAS 150 will depend on the extent to which we enter into these transactions in the future.

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Derivatives In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends SFAS 133 for decisions made as part of the Derivatives Implementation Group (DIG) process and in connection with other FASB projects. Specifically, SFAS 149 clarifies the definition of a derivative by focusing on the meaning of the initial net investment criteria, amends the definition of an “underlying” (that is, the rate or index in a derivative transaction) in SFAS 133 to conform with language in FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and clarifies when a derivative contains a financing component. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, except for provisions made as part of the DIG process, which continue to be applied in accordance with their respective effective dates. The adoption of SFAS 149 did not have a material impact on our consolidated financial position or results of operations.

Consolidations In January 2003, FASB issued FIN 46, Consolidation of Variable Interest Entities, which addresses consolidation of variable interest entities (VIEs), certain of which are also referred to as SPEs. VIEs are entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinate financial support from other parties. Under the provisions of FIN 46, a company will consolidate a VIE if the company has a variable interest (or combination of variable interests) that will absorb a majority of the VIE’s expected losses if they occur, that will receive a majority of the VIE’s expected residual returns if they occur or both. The company that consolidates a VIE is called the primary beneficiary. The provisions of FIN 46 are applicable to variable interests in VIEs created after January 31, 2003. Variable interests in VIEs created before February 1, 2003, are subject to the provisions of FIN 46 no later than July 1, 2003.

     We arrange financing for certain customer transactions through multi-seller commercial paper conduits that provide our customers with access to the commercial paper market. We provide liquidity commitments to these multi-seller conduits that we administer. As currently structured, these conduits are VIEs in which we are the primary beneficiary. Accordingly, on July 1, 2003, we consolidated the conduits we administer. This consolidation added $10 billion of assets, representing $5 billion of securities and $5 billion of other earning assets and $10 billion of short-term commercial paper borrowings. The consolidation of the conduits will result in the recharacterization of an estimated $60 million of fees as net interest income for the second half of 2003 and we believe this will reduce our net interest margin by approximately 5 basis points for the full year 2003. As administrator of the conduits, we are currently evaluating various restructuring alternatives, including alternatives in which our variable interests in the form of liquidity and credit enhancement no longer would cause us to be the primary beneficiary, resulting in deconsolidation of the conduits.

     We did not consolidate or de-consolidate any other significant variable interest entities in connection with the adoption and implementation of FIN 46; thus the adoption and implementation did not have a material impact on our consolidated financial position or results of operations, other than as indicated above. However, the continued consolidation of trusts associated with our trust preferred securities and the appropriate balance sheet classification of the securities under FIN 46 is still being determined.

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     Banking regulators have recently indicated that the capital requirements related to assets of conduits consolidated under FIN 46 or trust preferred securities, if deconsolidated under FIN 46, will remain unchanged until further notice. Therefore we expect no change in tier 1 capital as a result of the adoption of FIN 46. If the banking regulators change the capital treatment for trust preferred securities, our tier 1 capital would be reduced by the amount of outstanding trust preferred securities but we believe our capital classifications would remain unchanged.

Guarantees In November 2002, the FASB issued FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires a company to record as a liability the fair value of certain guarantees initiated by the company. The offsetting entry is dependent on the nature of the guarantee, with an asset generally being recorded, such as the consideration received for providing a letter of credit or prepaid rent for a residual value guarantee in an operating lease. The liability recorded will typically be reduced by a credit to the results of operations as the guarantee lapses, which generally will occur on a systematic basis over the term of the guarantee or at settlement of the guarantee.

     The initial measurement and recognition provisions of FIN 45 are effective for applicable guarantees written or modified after December 31, 2002. These recognition provisions require recording liabilities associated with certain guarantees that we provide. These include standby letters of credit for which the consideration is received at periods other than at the beginning of the term, certain liquidity facilities we provide to conduits we administer and any residual value guarantees we provide on operating leases. The adoption of FIN 45 did not have a material effect on our consolidated financial position or results of operations.

Exit Costs In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Under the provisions of SFAS 146, a liability for costs associated with exit or disposal activities is recognized only when a liability has been incurred. Previously, a liability was recognized when management committed to a plan of disposal and the plan met certain criteria, even though commitment to a plan did not, by itself, necessarily result in a liability.

     Specifically, under SFAS 146, involuntary employee termination costs associated with a one-time termination plan in excess of benefits that would be paid under an ongoing severance plan are recorded on the date that employees are notified, if the period between notification and termination is the lesser of 60 days or the legally required notification period. Otherwise, these costs are recognized evenly over the period from notification to termination. Involuntary termination costs under an ongoing plan are recorded under SFAS No. 112, Employers’ Accounting for Postemployment Benefits, on the date that management has committed to an exit or disposal plan. Under SFAS 146, costs associated with terminating a contract, including leases, are recognized when the contract is legally terminated or the benefits of the contract are no longer being realized.

     SFAS 146 is effective for exit plans initiated after December 31, 2002. The impact of this standard is dependent on the number and size of any exit or disposal activities that we undertake, and the effect will be largely based on the timing of expense recognition.

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Regulatory Matters Various legislative and regulatory proposals concerning the financial services industry are pending in Congress, the legislatures in states in which we conduct operations and before various regulatory agencies that supervise our operations. Given the uncertainty of the legislative and regulatory process, we cannot assess the impact of any such legislation or regulations on our consolidated financial position or results of operations. For a more detailed description of the laws and regulations governing our business operations, please see our 2002 Annual Report on Form 10-K.

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Table 1
SELECTED STATISTICAL DATA

	2003					2002
	Second			First		Fourth		Third		Second
(Dollars in millions)	Quarter			Quarter		Quarter		Quarter		Quarter
PROFITABILITY
Return on average common stockholders’ equity		12.78	%		12.94		11.07		11.63		11.52
Net interest margin (a)		3.78			3.86		3.86		3.94		3.97
Fee and other income as % of total revenue		45.60			44.64		43.89		42.86		45.63
Effective income tax rate		30.54	%		29.94		18.39		6.20		31.46
ASSET QUALITY
Allowance as % of loans, net		1.66	%		1.67		1.72		1.81		1.86
Allowance as % of nonperforming assets (b)		166			158		161		149		150
Net charge-offs as % of average loans, net		0.43			0.49		0.52		0.59		0.97
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale		1.04	%		1.08		1.11		1.23		1.24
CAPITAL ADEQUACY
Tier 1 capital ratio		8.33	%		8.27		8.22		8.11		7.83
Total capital ratio		11.92			11.99		12.01		12.02		11.89
Leverage		6.78	%		6.71		6.77		6.82		6.75
OTHER DATA
Employees (c)		81,316			81,152		80,778		80,987		82,686
Total financial centers/brokerage offices		3,176			3,251		3,280		3,342		3,347
ATMs		4,479			4,539		4,560		4,604		4,617
Actual common shares (In millions)		1,332			1,345		1,357		1,373		1,371
Common stock price	$	39.96			34.07		36.44		32.69		38.18
Market capitalization	$	53,228			45,828		49,461		44,887		52,347

(a)	Tax-equivalent.
(b)	These ratios do not include nonperforming loans included in loans held for sale.
(c)	Employees at March 31, 2003, have been restated from 79,555 reported in our May 15, 2003, 10-Q filing.

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Table 2
SUMMARIES OF INCOME, PER COMMON SHARE AND BALANCE SHEET DATA

				2003					2002
				Second			First		Fourth		Third		Second
(In millions, except per share data)				Quarter			Quarter		Quarter		Quarter		Quarter
SUMMARIES OF INCOME
Interest income				$	3,694			3,716		3,877		3,912		3,894
Tax-equivalent adjustment					63			64		59		54		54
Interest income (a)					3,757			3,780		3,936		3,966		3,948
Interest expense					1,174			1,202		1,407		1,446		1,433
Net interest income (a)					2,583			2,578		2,529		2,520		2,515
Provision for loan losses					195			224		308		435		397
Net interest income after provision for loan losses (a)					2,388			2,354		2,221		2,085		2,118
Securities gains					10			37		46		71		58
Fee and other income					2,156			2,041		1,932		1,819		2,052
Merger-related and restructuring expenses					96			64		145		107		143
Other noninterest expense					2,908			2,839		2,897		2,838		2,783
Income before income taxes (a)					1,550			1,529		1,157		1,030		1,302
Income taxes					455			438		203		60		393
Tax-equivalent adjustment					63			64		59		54		54
			Net income		1,032			1,027		895		916		855
Dividends on preferred stock					1			4		4		3		6
			Net income available to common stockholders	$	1,031			1,023		891		913		849
PER COMMON SHARE DATA
Basic				$	0.77			0.77		0.66		0.67		0.62
Diluted					0.77			0.76		0.66		0.66		0.62
Cash dividends				$	0.29			0.26		0.26		0.26		0.24
Average common shares — Basic					1,333			1,335		1,350		1,362		1,360
Average common shares — Diluted					1,346			1,346		1,360		1,374		1,375
Average common stockholders’ equity
	Quarter-to-date			$	32,362			32,052		31,944		31,098		29,565
	Year-to-date				32,208			32,052		30,384		29,858		29,228
Book value per common share					24.37			23.99		23.63		23.38		22.15
Common stock price
	High				43.15			38.69		37.43		37.47		39.50
	Low				34.47			32.72		28.75		30.51		35.98
	Period-end			$	39.96			34.07		36.44		32.69		38.18
		To earnings ratio (b)			14.02	X		12.62		14.02		13.18		25.28
		To book value			164	%		142		154		140		172
BALANCE SHEET DATA
Assets				$	364,285			348,064		341,839		333,880		324,679
Long-term debt				$	37,051			39,204		39,662		39,758		37,931

(a)	Tax-equivalent.
(b)	Based on diluted earnings per common share.

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Table 3
MERGER-RELATED AND RESTRUCTURING EXPENSES

		Six
		Months
		Ended
		June 30,
(In millions)		2003
MERGER-RELATED AND RESTRUCTURING EXPENSES — FIRST UNION/WACHOVIA
Personnel costs		$	13
Occupancy and equipment			46
Gain on regulatory-mandated branch sales			(9	)
Advertising			25
System conversion costs			61
Contract cancellations			3
Other			27
	Total First Union/Wachovia merger-related and restructuring expenses		166
Other restructuring expenses (reversals), net			(6	)
	Total merger-related and restructuring expenses	$	160

	First Union/
	Wachovia
(In millions)	Merger			Other			Total
ACTIVITY IN THE RESTRUCTURING ACCRUAL
Balance, December 31, 2002	$	61			12			73
Cash payments		(14	)		(2	)		(16	)
Noncash write-downs		(5	)		—			(5	)
Reversals of prior accruals		—			(6	)		(6	)
Balance, March 31, 2003		42			4			46
Cash payments		(17	)		(1	)		(18	)
Noncash write-downs		(6	)		—			(6	)
Balance, June 30, 2003	$	19			3			22

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Table 4
BUSINESS SEGMENTS (a)

		2003					2002
		Second			First		Fourth		Third		Second
(Dollars in millions)		Quarter			Quarter		Quarter		Quarter		Quarter
GENERAL BANK COMBINED (b)
Net interest income (c)		$	1,812			1,744		1,768		1,738		1,720
Fee and other income			581			562		569		520		508
Intersegment revenue			45			43		42		38		42
	Total revenue (c)		2,438			2,349		2,379		2,296		2,270
Provision for loan losses			99			105		144		114		98
Noninterest expense			1,324			1,297		1,341		1,282		1,252
Income taxes			361			335		316		319		327
Tax-equivalent adjustment			10			10		10		10		10
	Segment earnings	$	644			602		568		571		583
Economic profit		$	463			431		414		394		396
Risk adjusted return on capital			43.77	%		42.38		40.05		38.53		38.69
Economic capital, average		$	5,670			5,571		5,643		5,683		5,738
Cash overhead efficiency ratio (c)			54.32	%		55.21		56.36		55.87		55.17
Lending commitments		$	63,712			59,557		57,358		56,469		54,806
Average loans, net			113,055			110,882		106,081		101,429		100,861
Average core deposits		$	151,166			145,496		144,252		141,861		139,650
FTE employees			36,935			36,636		36,505		36,177		37,094
COMMERCIAL
Net interest income (c)		$	513			491		502		499		491
Fee and other income			81			95		84		86		87
Intersegment revenue			25			23		24		18		21
	Total revenue (c)		619			609		610		603		599
Provision for loan losses			28			41		73		38		37
Noninterest expense			255			255		264		254		249
Income taxes			113			104		89		105		104
Tax-equivalent adjustment			10			10		10		10		10
	Segment earnings	$	213			199		174		196		199
Economic profit		$	110			108		98		97		95
Risk adjusted return on capital			27.51	%		27.86		25.79		25.09		24.75
Economic capital, average		$	2,678			2,604		2,631		2,729		2,783
Cash overhead efficiency ratio (c)			41.14	%		41.88		43.27		42.25		41.66
Average loans, net		$	50,255			49,720		49,519		49,959		50,580
Average core deposits		$	28,910			26,121		25,483		23,721		21,885
RETAIL AND SMALL BUSINESS
Net interest income (c)		$	1,299			1,253		1,266		1,239		1,229
Fee and other income			500			467		485		434		421
Intersegment revenue			20			20		18		20		21
	Total revenue (c)		1,819			1,740		1,769		1,693		1,671
Provision for loan losses			71			64		71		76		61
Noninterest expense			1,069			1,042		1,077		1,028		1,003
Income taxes			248			231		227		214		223
Tax-equivalent adjustment			—			—		—		—		—
	Segment earnings	$	431			403		394		375		384
Economic profit		$	353			323		316		297		301
Risk adjusted return on capital			58.33	%		55.12		52.51		50.95		51.83
Economic capital, average		$	2,992			2,967		3,012		2,954		2,955
Cash overhead efficiency ratio (c)			58.81	%		59.87		60.87		60.72		59.99
Average loans, net		$	62,800			61,162		56,562		51,470		50,281
Average core deposits		$	122,256			119,375		118,769		118,140		117,765

(a)	Certain amounts presented in this Table 4 in periods prior to the second quarter of 2003 have been reclassified to conform to the presentation in the second quarter of 2003.
(b)	General Bank Combined represents the consolidation of the General Bank’s Commercial, and Retail and Small Business lines of business.
(c)	Tax-equivalent.

(Continued)

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Table 4
BUSINESS SEGMENTS

		2003						2002
		Second			First			Fourth			Third			Second
(Dollars in millions)		Quarter			Quarter			Quarter			Quarter			Quarter
CAPITAL MANAGEMENT COMBINED (a)
Net interest income (b)		$	37			38			39			42			40
Fee and other income			800			735			750			729			788
Intersegment revenue			(16	)		(19	)		(18	)		(18	)		(19	)
	Total revenue (b)		821			754			771			753			809
Provision for loan losses			—			—			—			—			—
Noninterest expense			662			625			621			614			657
Income taxes			59			46			55			51			55
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	100			83			95			88			97
Economic profit		$	81			64			76			70			77
Risk adjusted return on capital			56.72	%		49.54			56.57			53.07			54.67
Economic capital, average		$	710			678			667			658			710
Cash overhead efficiency ratio (b)			80.74	%		82.73			80.56			81.59			81.18
Average loans, net		$	140			134			131			177			186
Average core deposits		$	1,338			1,367			1,487			1,314			1,269
FTE employees			12,428			12,528			12,682			12,999			13,345
Assets under management		$	239,837			233,134			232,430			227,486			230,038
RETAIL BROKERAGE SERVICES
Net interest income (b)		$	29			32			31			36			38
Fee and other income			572			521			524			515			564
Intersegment revenue			(16	)		(18	)		(18	)		(17	)		(20	)
	Total revenue (b)		585			535			537			534			582
Provision for loan losses			—			—			—			—			—
Noninterest expense			481			458			452			457			499
Income taxes			39			27			32			29			29
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	65			50			53			48			54
Economic profit		$	51			35			39			34			38
Risk adjusted return on capital			48.36	%		38.60			42.12			38.57			38.71
Economic capital, average		$	550			523			505			499			549
Cash overhead efficiency ratio (b)			82.22	%		85.37			84.27			85.65			85.68
Average loans, net		$	2			3			2			2			2
Average core deposits		$	208			180			210			198			107

(a)	Capital Management Combined represents the consolidation of Capital Management’s Retail Brokerage Services, Asset Management, and Other, which primarily serves to eliminate intersegment revenue.
(b)	Tax-equivalent.

(Continued)

37

Table 4
BUSINESS SEGMENTS

		2003						2002
		Second			First			Fourth			Third			Second
(Dollars in millions)		Quarter			Quarter			Quarter			Quarter			Quarter
ASSET MANAGEMENT
Net interest income (b)		$	7			5			7			5			1
Fee and other income			236			224			233			225			235
Intersegment revenue			1			(1	)		—			(2	)		(1	)
	Total revenue (b)		244			228			240			228			235
Provision for loan losses			—			—			—			—			—
Noninterest expense			192			178			180			170			169
Income taxes			19			18			21			21			25
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	33			32			39			37			41
Economic profit		$	28			28			34			33			37
Risk adjusted return on capital			79.96	%		81.90			93.15			90.01			102.24
Economic capital, average		$	163			158			165			162			164
Cash overhead efficiency ratio (b)			78.87	%		77.96			74.66			74.65			71.99
Average loans, net		$	138			131			129			175			184
Average core deposits		$	1,130			1,187			1,277			1,116			1,162
OTHER
Net interest income (b)		$	1			1			1			1			1
Fee and other income			(8	)		(10	)		(7	)		(11	)		(11	)
Intersegment revenue			(1	)		—			—			1			2
	Total revenue (b)		(8	)		(9	)		(6	)		(9	)		(8	)
Provision for loan losses			—			—			—			—			—
Noninterest expense			(11	)		(11	)		(11	)		(13	)		(11	)
Income taxes			1			1			2			1			1
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	2			1			3			3			2
Economic profit		$	2			1			3			3			2
Risk adjusted return on capital			—	%		—			—			—			—
Economic capital, average		$	(3	)		(3	)		(3	)		(3	)		(3	)
Cash overhead efficiency ratio (b)			—	%		—			—			—			—
Average loans, net		$	—			—			—			—			—
Average core deposits		$	—			—			—			—			—

(Continued)

38

Table 4
BUSINESS SEGMENTS

		2003					2002
		Second			First		Fourth		Third		Second
(Dollars in millions)		Quarter			Quarter		Quarter		Quarter		Quarter
WEALTH MANAGEMENT
Net interest income (a)		$	106			103		103		100		100
Fee and other income			131			133		135		122		137
Intersegment revenue			2			1		1		1		2
	Total revenue (a)		239			237		239		223		239
Provision for loan losses			5			4		6		3		7
Noninterest expense			175			170		172		161		164
Income taxes			22			23		22		21		25
Tax-equivalent adjustment			—			—		—		—		—
	Segment earnings	$	37			40		39		38		43
Economic profit		$	25			27		27		24		33
Risk adjusted return on capital			36.35	%		40.94		39.82		37.52		47.24
Economic capital, average		$	384			373		375		364		360
Cash overhead efficiency ratio (a)			73.62	%		71.72		71.62		72.08		68.73
Lending commitments		$	3,678			3,343		3,288		3,145		3,147
Average loans, net			9,558			9,339		9,028		8,854		8,632
Average core deposits		$	10,817			10,662		10,339		10,006		9,879
FTE employees			3,921			3,881		3,726		3,760		3,893

(a) Tax-equivalent.

(Continued)

39

Table 4
BUSINESS SEGMENTS

		2003						2002
		Second			First			Fourth			Third			Second
(Dollars in millions)		Quarter			Quarter			Quarter			Quarter			Quarter
CORPORATE AND INVESTMENT
BANK COMBINED (a)
Net interest income (b)		$	551			565			589			602			583
Fee and other income			578			571			375			347			495
Intersegment revenue			(29	)		(26	)		(25	)		(20	)		(24	)
	Total revenue (b)		1,100			1,110			939			929			1,054
Provision for loan losses			95			110			161			317			293
Noninterest expense			567			557			537			509			517
Income taxes			132			138			69			22			65
Tax-equivalent adjustment			31			26			23			18			27
	Segment earnings	$	275			279			149			63			152
Economic profit		$	126			127			13			15			76
Risk adjusted return on capital			19.37	%		19.13			11.76			11.88			15.18
Economic capital, average		$	6,042			6,343			6,602			6,964			7,277
Cash overhead efficiency ratio (b)			51.62	%		50.12			57.28			54.71			49.14
Lending commitments		$	75,132			79,060			82,163			84,188			88,891
Average loans, net			34,608			36,104			38,673			40,250			41,580
Average core deposits		$	14,815			14,120			13,491			12,832			12,207
FTE employees			4,309			4,157			4,203			4,308			4,289
CORPORATE LENDING
Net interest income (b)		$	300			310			339			355			350
Fee and other income			134			155			107			120			147
Intersegment revenue			3			4			3			4			4
	Total revenue (b)		437			469			449			479			501
Provision for loan losses			95			103			160			317			278
Noninterest expense			128			122			110			111			112
Income taxes			80			92			67			22			44
Tax-equivalent adjustment			1			—			1			—			—
	Segment earnings	$	133			152			111			29			67
Economic profit		$	49			54			33			37			48
Risk adjusted return on capital			16.23	%		16.29			13.97			14.12			14.96
Economic capital, average		$	3,740			4,161			4,422			4,728			4,870
Cash overhead efficiency ratio (b)			29.34	%		26.00			24.51			23.13			22.38
Average loans, net		$	29,100			30,686			33,113			34,565			36,104
Average core deposits		$	1,249			1,301			1,410			1,534			1,135
TREASURY AND TRADE FINANCE
Net interest income (b)		$	76			79			83			81			77
Fee and other income			175			178			170			176			171
Intersegment revenue			(23	)		(23	)		(19	)		(16	)		(19	)
	Total revenue (b)		228			234			234			241			229
Provision for loan losses			(3	)		(3	)		2			—			16
Noninterest expense			173			175			171			163			157
Income taxes			22			22			22			28			20
Tax-equivalent adjustment			—			—			1			1			—
	Segment earnings	$	36			40			38			49			36
Economic profit		$	25			30			31			41			37
Risk adjusted return on capital			53.14	%		59.45			66.20			80.78			74.97
Economic capital, average		$	244			248			229			231			232
Cash overhead efficiency ratio (b)			76.39	%		74.44			73.27			67.82			68.63
Average loans, net		$	3,703			3,507			3,687			3,788			3,478
Average core deposits		$	9,226			9,040			8,908			8,663			8,593

(a)	Corporate and Investment Bank Combined represents the consolidation of the Corporate and Investment Bank’s Corporate Lending, Treasury and Trade Finance, Investment Banking, and Principal Investing lines of business.
(b)	Tax-equivalent.

(Continued)

40

Table 4
BUSINESS SEGMENTS

		2003						2002
		Second			First			Fourth			Third			Second
(Dollars in millions)		Quarter			Quarter			Quarter			Quarter			Quarter
INVESTMENT BANKING
Net interest income (b)		$	175			175			169			168			155
Fee and other income			326			282			203			80			219
Intersegment revenue			(9	)		(7	)		(9	)		(8	)		(9	)
	Total revenue (b)		492			450			363			240			365
Provision for loan losses			3			9			(1	)		—			(1	)
Noninterest expense			255			254			249			229			243
Income taxes (benefits)			55			42			20			(14	)		18
Tax-equivalent adjustment			30			26			21			17			27
	Segment earnings	$	149			119			74			8			78
Economic profit		$	120			97			47			(13	)		48
Risk adjusted return on capital			52.09	%		47.46			28.07			6.21			27.32
Economic capital, average		$	1,167			1,085			1,063			1,044			1,169
Cash overhead efficiency ratio (b)			51.69	%		56.40			68.34			94.91			66.76
Average loans, net		$	1,805			1,907			1,868			1,897			1,998
Average core deposits		$	4,340			3,779			3,173			2,635			2,479
PRINCIPAL INVESTING
Net interest income (b)		$	—			1			(2	)		(2	)		1
Fee and other income			(57	)		(44	)		(105	)		(29	)		(42	)
Intersegment revenue			—			—			—			—			—
	Total revenue (b)		(57	)		(43	)		(107	)		(31	)		(41	)
Provision for loan losses			—			1			—			—			—
Noninterest expense			11			6			7			6			5
Income tax benefits			(25	)		(18	)		(40	)		(14	)		(17	)
Tax-equivalent adjustment			—			—			—			—			—
	Segment loss	$	(43	)		(32	)		(74	)		(23	)		(29	)
Economic profit		$	(68	)		(54	)		(98	)		(50	)		(57	)
Risk adjusted return on capital			(19.50	)%		(14.98	)		(32.77	)		(9.50	)		(11.61	)
Economic capital, average		$	891			849			888			961			1,006
Cash overhead efficiency ratio (b)			n/m	%		n/m			n/m			n/m			n/m
Average loans, net		$	—			4			5			—			—
Average core deposits		$	—			—			—			—			—

(Continued)

41

Table 4
BUSINESS SEGMENTS

		2003						2002
		Second			First			Fourth			Third			Second
(Dollars in millions)		Quarter			Quarter			Quarter			Quarter			Quarter
PARENT
Net interest income (a)		$	77			128			30			38			72
Fee and other income			76			77			149			172			182
Intersegment revenue			(2	)		1			—			(1	)		(1	)
	Total revenue (a)		151			206			179			209			253
Provision for loan losses			(4	)		5			(3	)		1			(1	)
Noninterest expense			180			190			226			272			193
Income tax benefits			(83	)		(80	)		(206	)		(313	)		(25	)
Tax-equivalent adjustment			22			28			26			26			17
	Segment earnings	$	36			63			136			223			69
Economic profit		$	44			88			147			253			99
Risk adjusted return on capital			18.36	%		25.90			36.75			54.15			27.19
Economic capital, average		$	2,419			2,367			2,276			2,317			2,440
Cash overhead efficiency ratio (a)			31.78	%		24.66			44.45			56.63			12.34
Lending commitments		$	16,091			15,381			15,211			15,537			13,861
Average loans, net			374			1,505			(634	)		1,218			4,089
Average core deposits		$	1,281			1,343			1,169			1,171			1,505
FTE employees			23,723			23,950			23,662			23,743			24,065

(a) Tax-equivalent.

(Continued)

42

Table 4
BUSINESS SEGMENTS

			Three Months Ended June 30, 2003
																	Net Merger-
											Corporate						Related
											and						and
			General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)			Bank			Management			Management		Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)			$	1,812			37			106		551			77			(63	)		2,520
Fee and other income				581			800			131		578			76			—			2,166
Intersegment revenue				45			(16	)		2		(29	)		(2	)		—			-
	Total revenue (a)			2,438			821			239		1,100			151			(63	)		4,686
Provision for loan losses				99			—			5		95			(4	)		—			195
Noninterest expense				1,324			662			175		567			180			96			3,004
Income taxes (benefits)				361			59			22		132			(83	)		(36	)		455
Tax-equivalent adjustment				10			—			—		31			22			(63	)		-
	Net income			644			100			37		275			36			(60	)		1,032
Dividends on preferred stock				—			—			—		—			1			—			1
		Net income available to common stockholders	$	644			100			37		275			35			(60	)		1,031
Economic profit			$	463			81			25		126			44			—			739
Risk adjusted return on capital				43.77	%		56.72			36.35		19.37			18.36			—			30.47
Economic capital, average			$	5,670			710			384		6,042			2,419			—			15,225
Cash overhead efficiency ratio (a)				54.32	%		80.74			73.62		51.62			31.78			—			58.50
Lending commitments			$	63,712			—			3,678		75,132			16,091			—			158,613
Average loans, net				113,055			140			9,558		34,608			374			—			157,735
Average core deposits			$	151,166			1,338			10,817		14,815			1,281			—			179,417
FTE employees				36,935			12,428			3,921		4,309			23,723			—			81,316

			Three Months Ended June 30, 2002
																	Net Merger-
											Corporate						Related
											and						and
			General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)			Bank			Management			Management		Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)			$	1,720			40			100		583			72			(54	)		2,461
Fee and other income				508			788			137		495			182			—			2,110
Intersegment revenue				42			(19	)		2		(24	)		(1	)		—			—
	Total revenue (a)			2,270			809			239		1,054			253			(54	)		4,571
Provision for loan losses				98			—			7		293			(1	)		—			397
Noninterest expense				1,252			657			164		517			193			143			2,926
Income taxes (benefits)				327			55			25		65			(25	)		(54	)		393
Tax-equivalent adjustment				10			—			—		27			17			(54	)		—
	Net income			583			97			43		152			69			(89	)		855
Dividends on preferred stock				—			—			—		—			6			—			6
		Net income available to common stockholders	$	583			97			43		152			63			(89	)		849
Economic profit			$	396			77			33		76			99			—			681
Risk adjusted return on capital				38.69	%		54.67			47.24		15.18			27.19			—			27.51
Economic capital, average			$	5,738			710			360		7,277			2,440			—			16,525
Cash overhead efficiency ratio (a)				55.17	%		81.18			68.73		49.14			12.34			—			56.72
Lending commitments			$	54,806			—			3,147		88,891			13,861			—			160,705
Average loans, net				100,861			186			8,632		41,580			4,089			—			155,348
Average core deposits			$	139,650			1,269			9,879		12,207			1,505			—			164,510
FTE employees				37,094			13,345			3,893		4,289			24,065			—			82,686

(a)	Tax-equivalent.
(b)	The tax-equivalent amounts are eliminated herein in order for “Total” amounts to agree with amounts appearing in the Consolidated Statements of Income.

(Continued)

43

Table 4
BUSINESS SEGMENTS

		Six Months Ended
		June 30,
(Dollars in millions)		2003			2002
GENERAL BANK COMBINED (a)
Net interest income (b)		$	3,556			3,370
Fee and other income			1,143			1,006
Intersegment revenue			88			82
	Total revenue (b)		4,787			4,458
Provision for loan losses			204			213
Noninterest expense			2,621			2,483
Income taxes			696			623
Tax-equivalent adjustment			20			20
	Segment earnings	$	1,246			1,119
Economic profit		$	894			761
Risk adjusted return on capital			43.08	%		37.97
Economic capital, average		$	5,621			5,691
Cash overhead efficiency ratio (b)			54.76	%		55.69
Lending commitments		$	63,712			54,806
Average loans, net			111,974			99,472
Average core deposits		$	148,347			137,878
FTE employees			36,935			37,094
COMMERCIAL
Net interest income (b)		$	1,004			959
Fee and other income			176			184
Intersegment revenue			48			38
	Total revenue (b)		1,228			1,181
Provision for loan losses			69			86
Noninterest expense			510			497
Income taxes			217			198
Tax-equivalent adjustment			20			20
	Segment earnings	$	412			380
Economic profit		$	218			187
Risk adjusted return on capital			27.68	%		24.71
Economic capital, average		$	2,641			2,754
Cash overhead efficiency ratio (b)			41.51	%		42.08
Average loans, net		$	49,989			50,355
Average core deposits		$	27,523			21,175
RETAIL AND SMALL BUSINESS
Net interest income (b)		$	2,552			2,411
Fee and other income			967			822
Intersegment revenue			40			44
	Total revenue (b)		3,559			3,277
Provision for loan losses			135			127
Noninterest expense			2,111			1,986
Income taxes			479			425
Tax-equivalent adjustment			—			—
	Segment earnings	$	834			739
Economic profit		$	676			574
Risk adjusted return on capital			56.74	%		50.40
Economic capital, average		$	2,980			2,937
Cash overhead efficiency ratio (b)			59.33	%		60.58
Average loans, net		$	61,985			49,117
Average core deposits		$	120,824			116,703

(a)	General Bank Combined represents the consolidation of the General Bank’s Commercial, and Retail and Small Business lines of business.
(b)	Tax-equivalent.

(Continued)

44

Table 4
BUSINESS SEGMENTS

		Six Months Ended
		June 30,
(Dollars in millions)		2003			2002
CAPITAL MANAGEMENT COMBINED (a)
Net interest income (b)		$	75			81
Fee and other income			1,535			1,571
Intersegment revenue			(35	)		(36	)
	Total revenue (b)		1,575			1,616
Provision for loan losses			—			—
Noninterest expense			1,287			1,320
Income taxes			105			108
Tax-equivalent adjustment			—			—
	Segment earnings	$	183			188
Economic profit		$	145			149
Risk adjusted return on capital			53.23	%		52.94
Economic capital, average		$	694			716
Cash overhead efficiency ratio (b)			81.69	%		81.68
Average loans, net		$	137			176
Average core deposits		$	1,353			1,283
FTE employees			12,428			13,345
Assets under management		$	239,837			230,038
RETAIL BROKERAGE SERVICES
Net interest income (b)		$	61			79
Fee and other income			1,093			1,116
Intersegment revenue			(34	)		(37	)
	Total revenue (b)		1,120			1,158
Provision for loan losses			—			—
Noninterest expense			939			1,003
Income taxes			66			56
Tax-equivalent adjustment			—			—
	Segment earnings	$	115			99
Economic profit		$	86			69
Risk adjusted return on capital			43.63	%		35.98
Economic capital, average		$	536			551
Cash overhead efficiency ratio (b)			83.72	%		86.61
Average loans, net		$	2			2
Average core deposits		$	195			103

(a)	Capital Management Combined represents the consolidation of Capital Management’s Retail Brokerage Services, Asset Management, and Other, which primarily serves to eliminate intersegment revenue.
(b)	Tax-equivalent.

(Continued)

45

Table 4
BUSINESS SEGMENTS

		Six Months Ended
		June 30,
(Dollars in millions)		2003			2002
ASSET MANAGEMENT
Net interest income (b)		$	12			—
Fee and other income			460			477
Intersegment revenue			—			(1	)
	Total revenue (b)		472			476
Provision for loan losses			—			—
Noninterest expense			370			341
Income taxes			37			50
Tax-equivalent adjustment			—			—
	Segment earnings	$	65			85
Economic profit		$	56			76
Risk adjusted return on capital			80.91	%		102.76
Economic capital, average		$	161			168
Cash overhead efficiency ratio (b)			78.43	%		71.71
Average loans, net		$	135			174
Average core deposits		$	1,158			1,180
OTHER
Net interest income (b)		$	2			2
Fee and other income			(18	)		(22	)
Intersegment revenue			(1	)		2
	Total revenue (b)		(17	)		(18	)
Provision for loan losses			—			—
Noninterest expense			(22	)		(24	)
Income taxes			2			2
Tax-equivalent adjustment			—			—
	Segment earnings	$	3			4
Economic profit		$	3			4
Risk adjusted return on capital			—	%		—
Economic capital, average		$	(3	)		(3	)
Cash overhead efficiency ratio (b)			—	%		—
Average loans, net		$	—			—
Average core deposits		$	—			—

(Continued)

46

Table 4
BUSINESS SEGMENTS

		Six Months Ended
		June 30,
(Dollars in millions)		2003			2002
WEALTH MANAGEMENT
Net interest income (a)		$	209			197
Fee and other income			264			272
Intersegment revenue			3			3
	Total revenue (a)		476			472
Provision for loan losses			9			8
Noninterest expense			345			326
Income taxes			45			51
Tax-equivalent adjustment			—			—
	Segment earnings	$	77			87
Economic profit		$	52			63
Risk adjusted return on capital			38.59	%		46.66
Economic capital, average		$	378			355
Cash overhead efficiency ratio (a)			72.67	%		69.22
Lending commitments		$	3,678			3,147
Average loans, net			9,449			8,517
Average core deposits		$	10,740			9,887
FTE employees			3,921			3,893

(a) Tax-equivalent.

(Continued)

47

Table 4
BUSINESS SEGMENTS

		Six Months Ended
		June 30,
(Dollars in millions)		2003			2002
CORPORATE AND INVESTMENT BANK COMBINED (a)
Net interest income (b)		$	1,116			1,166
Fee and other income			1,149			993
Intersegment revenue			(55	)		(42	)
	Total revenue (b)		2,210			2,117
Provision for loan losses			205			515
Noninterest expense			1,124			1,036
Income taxes			270			160
Tax-equivalent adjustment			57			52
	Segment earnings	$	554			354
Economic profit		$	253			145
Risk adjusted return on capital			19.25	%		14.89
Economic capital, average		$	6,191			7,507
Cash overhead efficiency ratio (b)			50.87	%		48.95
Lending commitments		$	75,132			88,891
Average loans, net			35,352			42,456
Average core deposits		$	14,469			12,481
FTE employees			4,309			4,289
CORPORATE LENDING
Net interest income (b)		$	610			720
Fee and other income			289			270
Intersegment revenue			7			7
	Total revenue (b)		906			997
Provision for loan losses			198			500
Noninterest expense			250			228
Income taxes			172			103
Tax-equivalent adjustment			1			1
	Segment earnings	$	285			165
Economic profit		$	103			81
Risk adjusted return on capital			16.26	%		14.23
Economic capital, average		$	3,949			5,038
Cash overhead efficiency ratio (b)			27.61	%		22.87
Average loans, net		$	29,889			36,979
Average core deposits		$	1,275			1,210
TREASURY AND TRADE FINANCE
Net interest income (b)		$	155			152
Fee and other income			353			339
Intersegment revenue			(46	)		(36	)
	Total revenue (b)		462			455
Provision for loan losses			(6	)		16
Noninterest expense			348			314
Income taxes			44			45
Tax-equivalent adjustment			—			—
	Segment earnings	$	76			80
Economic profit		$	55			73
Risk adjusted return on capital			56.30	%		74.32
Economic capital, average		$	246			232
Cash overhead efficiency ratio (b)			75.40	%		68.99
Average loans, net		$	3,605			3,425
Average core deposits		$	9,134			8,651

(a)	Corporate and Investment Bank Combined represents the consolidation of the Corporate and Investment Bank’s Corporate Lending, Treasury and Trade Finance, Investment Banking, and Principal Investing lines of business.
(b)	Tax-equivalent.

(Continued)

48

Table 4
BUSINESS SEGMENTS

		Six Months Ended
		June 30,
(Dollars in millions)		2003			2002
INVESTMENT BANKING
Net interest income (b)		$	350			293
Fee and other income			608			516
Intersegment revenue			(16	)		(13	)
	Total revenue (b)		942			796
Provision for loan losses			12			(1	)
Noninterest expense			509			483
Income taxes			97			64
Tax-equivalent adjustment			56			51
	Segment earnings	$	268			199
Economic profit		$	217			138
Risk adjusted return on capital			49.87	%		34.25
Economic capital, average		$	1,126			1,197
Cash overhead efficiency ratio (b)			53.94	%		60.70
Average loans, net		$	1,856			2,052
Average core deposits		$	4,060			2,620
PRINCIPAL INVESTING
Net interest income (b)		$	1			1
Fee and other income			(101	)		(132	)
Intersegment revenue			—			—
	Total revenue (b)		(100	)		(131	)
Provision for loan losses			1			—
Noninterest expense			17			11
Income tax benefits			(43	)		(52	)
Tax-equivalent adjustment			—			—
	Segment loss	$	(75	)		(90	)
Economic profit		$	(122	)		(147	)
Risk adjusted return on capital			(17.31	)%		(17.50	)
Economic capital, average		$	870			1,040
Cash overhead efficiency ratio (b)			n/m	%		n/m
Average loans, net		$	2			—
Average core deposits		$	—			—

(Continued)

49

Table 4
BUSINESS SEGMENTS

		Six Months Ended
		June 30,
(Dollars in millions)		2003			2002
PARENT
Net interest income (a)		$	205			178
Fee and other income			153			295
Intersegment revenue			(1	)		(7	)
	Total revenue (a)		357			466
Provision for loan losses			1			—
Noninterest expense			370			395
Income tax benefits			(163	)		(66	)
Tax-equivalent adjustment			50			33
	Segment earnings	$	99			104
Economic profit		$	132			168
Risk adjusted return on capital			22.07	%		24.84
Economic capital, average		$	2,394			2,449
Cash overhead efficiency ratio (a)			27.72	%		14.22
Lending commitments			16,091			13,861
Average loans, net		$	937			5,710
Average core deposits		$	1,311			1,998
FTE employees			23,723			24,065

(a) Tax-equivalent.

(Continued)

50

Table 4
BUSINESS SEGMENTS

			Six Months Ended June 30, 2003
																	Net Merger-
											Corporate						Related
											and						and
			General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)			Bank			Management			Management		Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)			$	3,556			75			209		1,116			205			(127	)		5,034
Fee and other income				1,143			1,535			264		1,149			153			—			4,244
Intersegment revenue				88			(35	)		3		(55	)		(1	)		—			—
	Total revenue (a)			4,787			1,575			476		2,210			357			(127	)		9,278
Provision for loan losses				204			—			9		205			1			—			419
Noninterest expense				2,621			1,287			345		1,124			370			160			5,907
Income taxes (benefits)				696			105			45		270			(163	)		(60	)		893
Tax-equivalent adjustment				20			—			—		57			50			(127	)		—
	Net income			1,246			183			77		554			99			(100	)		2,059
Dividends on preferred stock				—			—			—		—			5			—			5
		Net income available to common stockholders	$	1,246			183			77		554			94			(100	)		2,054
Economic profit			$	894			145			52		253			132			—			1,476
Risk adjusted return on capital				43.08	%		53.23			38.59		19.25			22.07			—			30.48
Economic capital, average			$	5,621			694			378		6,191			2,394			—			15,278
Cash overhead efficiency ratio (a)				54.76	%		81.69			72.67		50.87			27.72			—			58.24
Lending commitments			$	63,712			—			3,678		75,132			16,091			—			158,613
Average loans, net				111,974			137			9,449		35,352			937			—			157,849
Average core deposits			$	148,347			1,353			10,740		14,469			1,311			—			176,220
FTE employees				36,935			12,428			3,921		4,309			23,723			—			81,316

			Six Months Ended June 30, 2002
																	Net Merger-
											Corporate						Related
											and						and
			General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)			Bank			Management			Management		Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)			$	3,370			81			197		1,166			178			(105	)		4,887
Fee and other income				1,006			1,571			272		993			295			—			4,137
Intersegment revenue				82			(36	)		3		(42	)		(7	)		—			—
	Total revenue (a)			4,458			1,616			472		2,117			466			(105	)		9,024
Provision for loan losses				213			—			8		515			—			—			736
Noninterest expense				2,483			1,320			326		1,036			395			135			5,695
Income taxes (benefits)				623			108			51		160			(66	)		(51	)		825
Tax-equivalent adjustment				20			—			—		52			33			(105	)		—
	Net income			1,119			188			87		354			104			(84	)		1,768
Dividends on preferred stock				—			—			—		—			12			—			12
		Net income available to common stockholders	$	1,119			188			87		354			92			(84	)		1,756
Economic profit			$	761			149			63		145			168			—			1,286
Risk adjusted return on capital				37.97	%		52.94			46.66		14.89			24.84			—			26.51
Economic capital, average			$	5,691			716			355		7,507			2,449			—			16,718
Cash overhead efficiency ratio (a)				55.69	%		81.68			69.22		48.95			14.22			—			57.31
Lending commitments			$	54,806			—			3,147		88,891			13,861			—			160,705
Average loans, net				99,472			176			8,517		42,456			5,710			—			156,331
Average core deposits			$	137,878			1,283			9,887		12,481			1,998			—			163,527
FTE employees				37,094			13,345			3,893		4,289			24,065			—			82,686

(a)	Tax-equivalent.
(b)	The tax-equivalent amounts are eliminated herein in order for “Total” amounts to agree with amounts appearing in the Consolidated Statements of Income.

(Continued)

51

Table 5
NET TRADING REVENUE — INVESTMENT BANKING (a)

		2003				2002
		Second		First		Fourth			Third			Second
(In millions)		Quarter		Quarter		Quarter			Quarter			Quarter
Net interest income (Tax-equivalent)		$	111		114		107			118			101
Trading accounts profits (losses)			87		117		(19	)		(80	)		31
Other fee income			71		54		67			57			69
	Total net trading revenue (Tax-equivalent)	$	269		285		155			95			201

(a) Certain amounts presented in periods prior to the second quarter of 2003 have been reclassified to conform to the presentation in the second quarter of 2003.

52

Table 6
SELECTED RATIOS

	Six Months Ended
	June 30,					2003				2002
						Second		First		Fourth		Third		Second
	2003			2002		Quarter		Quarter		Quarter		Quarter		Quarter
PERFORMANCE RATIOS (a)
Assets to stockholders’ equity		10.54	X		10.77		10.56		10.52		10.33		10.34		10.64
Return on assets		1.22	%		1.13		1.21		1.23		1.08		1.13		1.09
Return on common stockholders’ equity		12.86			12.12		12.78		12.94		11.07		11.63		11.52
Return on total stockholders’ equity		12.89	%		12.19		12.79		12.99		11.12		11.68		11.59
DIVIDEND PAYOUT RATIOS
Common shares		35.95	%		37.50		37.66		34.21		39.39		39.39		38.71
Preferred and common shares		36.17	%		37.77		37.90		34.43		39.90		39.38		39.09

(a) Based on average balances and net income.

53

Table 7
TRADING ACCOUNT ASSETS AND LIABILITIES

		2003				2002
		Second		First		Fourth		Third		Second
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
TRADING ACCOUNT ASSETS
U.S. Treasury		$	2,832		3,716		2,545		2,608		3,485
U.S. Government agencies			3,203		2,523		1,802		2,129		3,497
State, county and municipal			248		453		358		811		398
Mortgage-backed securities			7,439		3,538		1,664		4,415		1,973
Other asset-backed securities			3,351		3,816		4,103		3,955		3,852
Corporate bonds and debentures			4,077		3,683		3,295		3,543		3,997
Derivative financial instruments			16,722		15,108		17,214		17,344		15,797
Sundry			2,564		1,841		2,174		1,097		1,571
	Total trading account assets	$	40,436		34,678		33,155		35,902		34,570
TRADING ACCOUNT LIABILITIES
Securities sold short			9,064		6,423		5,920		4,796		6,960
Derivative financial instruments			16,077		14,473		16,980		17,414		15,485
	Total trading account liabilities	$	25,141		20,896		22,900		22,210		22,445

54

Table 8
SECURITIES

				June 30, 2003
																Gross Unrealized					Average
				1 Year			1-5		5-10		After 10								Amortized		Maturity
(In millions)				or Less			Years		Years		Years		Total		Gains		Losses		Cost		in Years
MARKET VALUE
U.S. Treasury				$	106			752		385		—		1,243		35		7		1,215		4.62
U.S. Government agencies					326			31,604		72		—		32,002		801		125		31,326		1.61
Asset-backed
	Residual interests
		from securitizations			27			512		710		78		1,327		567		—		760		5.62
	Retained bonds
		from securitizations			815			7,404		2,134		32		10,385		319		5		10,071		4.33
	Collateralized mortgage
		obligations			1,034			5,633		—		—		6,667		74		4		6,597		2.08
	Commercial mortgage-backed				—			2,767		4,683		—		7,450		741		3		6,712		6.04
	Other				201			634		41		6		882		14		4		872		2.63
State, county and municipal					59			277		521		2,551		3,408		322		64		3,150		17.48
Sundry					2,921			1,831		4,103		1,545		10,400		233		62		10,229		4.56
			Total market value	$	5,489			51,414		12,649		4,212		73,764		3,106		274		70,932		3.68
MARKET VALUE
Debt securities				$	5,489			51,414		12,649		2,890		72,442		3,087		268		69,623
Equity securities					—			—		—		1,322		1,322		19		6		1,309
			Total market value	$	5,489			51,414		12,649		4,212		73,764		3,106		274		70,932
AMORTIZED COST
Debt securities				$	5,389			49,782		11,732		2,720		69,623
Equity securities					—			—		—		1,309		1,309
			Total amortized cost	$	5,389			49,782		11,732		4,029		70,932
WEIGHTED AVERAGE YIELD
U.S. Treasury					1.16	%		2.19		2.32		—		2.14
U.S. Government agencies					6.68			4.67		4.72		—		4.69
Asset-backed
	Residual interests
		from securitizations			—			106.65		16.03		17.79		51.10
	Retained bonds
		from securitizations			7.02			5.15		1.85		11.77		4.62
	Collateralized mortgage
		obligations			3.14			3.81		—		—		3.71
	Commercial mortgage-backed				—			6.01		5.80		—		5.88
	Other				3.47			2.75		9.87		5.81		3.27
State, county and municipal					7.23			9.34		9.29		7.07		7.56
Sundry					4.22			7.91		4.88		4.81		5.20
	Consolidated				4.51	%		5.39		5.17		6.36		5.34

     At June 30, 2003, all securities were classified as available for sale.

     Included in U.S. Government agencies are agency securities retained from the securitization of residential mortgage loans. These securities had an amortized cost and market value of $3.0 billion and $3.1 billion at June 30, 2003, respectively.

     Included in asset-backed securities are retained bonds primarily from the securitization of prime equity lines, residential mortgage, commercial real estate, SBA and student loans. At June 30, 2003, retained bonds with an amortized cost of $9.9 billion and a market value of $10.2 billion are considered investment grade based on external ratings. Retained bonds with an amortized cost and market value of $9.2 billion and $9.5 billion at June 30, 2003, respectively, have an external credit rating of AA and above.

     Securities with an aggregate amortized cost of $43 billion at June 30, 2003, are pledged to secure U.S. Government and other public deposits and for other purposes as required by various statutes or agreements.

     Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Average maturity excludes equity securities and money market funds.

     Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state tax rates.

     At June 30, 2003, there were forward commitments to purchase securities at a cost that approximates a market value of $5.4 billion. At June 30, 2003, there were commitments to sell securities at a cost that approximates a market value of $1.5 billion.

     Gross gains and losses realized on the sale of debt securities for the six months ended June 30, 2003, were $187 million and $116 million (including $82 million of impairment losses), respectively, and gross gains and losses realized on the sale of equity securities were $4 million and $28 million, respectively.

55

Table 9
LOANS — ON-BALANCE SHEET, AND MANAGED AND SERVICING PORTFOLIOS

			2003				2002
			Second		First		Fourth		Third		Second
(In millions)			Quarter		Quarter		Quarter		Quarter		Quarter
ON-BALANCE SHEET LOAN PORTFOLIO
	COMMERCIAL
	Commercial, financial and agricultural		$	54,857		56,476		56,501		57,899		57,984
	Real estate — construction and other			6,827		6,833		6,849		7,558		8,035
	Real estate — mortgage			16,153		16,429		16,655		16,967		17,349
	Lease financing			23,204		23,060		22,667		22,616		22,044
	Foreign			6,622		6,433		6,425		6,992		7,241
		Total commercial		107,663		109,231		109,097		112,032		112,653
	CONSUMER
	Real estate — mortgage			25,564		25,288		24,979		17,527		19,803
	Installment loans			39,577		39,748		38,817		37,889		35,940
	Vehicle leasing			13		35		80		43		168
		Total consumer		65,154		65,071		63,876		55,459		55,911
		Total loans		172,817		174,302		172,973		167,491		168,564
	Unearned income			9,984		10,080		9,876		9,949		9,764
		Loans, net (On-balance sheet)	$	162,833		164,222		163,097		157,542		158,800
MANAGED PORTFOLIO (a)
COMMERCIAL
On-balance sheet loan portfolio			$	107,663		109,231		109,097		112,032		112,653
Securitized loans — off-balance sheet				2,126		2,190		2,218		2,288		2,318
Loans held for sale included in other assets				1,282		1,617		1,140		1,271		779
		Total commercial		111,071		113,038		112,455		115,591		115,750
CONSUMER
Real estate — mortgage
	On-balance sheet loan portfolio			25,564		25,288		24,979		17,527		19,803
	Securitized loans — off-balance sheet			185		251		325		397		—
	Securitized loans included in securities			3,762		4,971		6,223		7,268		5,761
	Loans held for sale included in other assets			2,696		2,154		2,719		2,474		1,387
		Total real estate — mortgage		32,207		32,664		34,246		27,666		26,951
Installment loans
	On-balance sheet loan portfolio			39,577		39,748		38,817		37,889		35,940
	Securitized loans — off-balance sheet			11,706		13,068		13,217		13,164		13,379
	Securitized loans included in securities			9,253		9,842		11,093		11,695		8,918
	Loans held for sale included in other assets			6,110		3,690		2,153		2,512		6,232
		Total installment loans		66,646		66,348		65,280		65,260		64,469
Vehicle leasing — on-balance sheet loan portfolio				13		35		80		43		168
		Total consumer		98,866		99,047		99,606		92,969		91,588
		Total managed portfolio	$	209,937		212,085		212,061		208,560		207,338
SERVICING PORTFOLIO (b)
Commercial (c)			$	73,128		65,076		59,336		53,611		50,001
Consumer			$	6,581		2,236		2,272		2,490		1,773

(a)	The managed portfolio includes the on-balance sheet loan portfolio, loans securitized for which the assets are classified in securities on-balance sheet, loans held for sale that are classified in other assets on-balance sheet and the off-balance sheet portfolio of securitized loans sold, where we service the loans.
(b)	The servicing portfolio consists of third party commercial and consumer loans for which our sole function is that of servicing the loans for the third parties.
(c)	The commercial servicing portfolio at March 31, 2003, has been restated from $60.863 billion reported in our May 15, 2003, 10-Q filing.

56

Table 10
LOANS HELD FOR SALE

		2003						2002
		Second			First			Fourth			Third			Second
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period		$	7,461			6,012			6,257			8,398			7,131
Core business activity
Core business activity, beginning of period			6,937			5,488			4,562			8,225			6,782
Originations/purchases			9,729			8,488			8,692			7,200			5,611
Transfer of performing loans to (from) loans held for sale, net			18			(49	)		(52	)		(3,639	)		(71	)
Lower of cost or market value adjustments			(6	)		(46	)		(13	)		(36	)		—
Performing loans sold or securitized			(6,171	)		(6,491	)		(7,419	)		(6,823	)		(3,683	)
Nonperforming loans sold			—			—			—			—			—
Other, principally payments			(745	)		(453	)		(282	)		(365	)		(414	)
Core business activity, end of period			9,762			6,937			5,488			4,562			8,225
Portfolio management activity
Portfolio management activity, beginning of period			524			524			1,695			173			349
Transfers to (from) loans held for sale, net
	Performing loans		83			244			245			1,697			(11	)
	Nonperforming loans		59			(12	)		105			201			—
Lower of cost or market value adjustments			—			40			(1	)		19			(8	)
Performing loans sold			(220	)		(147	)		(1,357	)		(13	)		(49	)
Nonperforming loans sold			(2	)		(51	)		(12	)		(30	)		(10	)
Allowance for loan losses related to loans
	transferred to loans held for sale		(44	)		(55	)		(122	)		(309	)		—
Other, principally payments			(74	)		(19	)		(29	)		(43	)		(98	)
Portfolio management activity, end of period			326			524			524			1,695			173
Balance, end of period (a)		$	10,088			7,461			6,012			6,257			8,398

(a) Nonperforming assets included in loans held for sale at June 30, and March 31, 2003, and at December 31, September 30, and June 30, 2002, were $167 million, $114 million, $138 million, $115 million and $108 million, respectively.

57

Table 11
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS

					2003						2002
					Second			First			Fourth			Third			Second
(In millions)					Quarter			Quarter			Quarter			Quarter			Quarter
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period					$	2,747			2,798			2,847			2,951			2,986
Provision for loan losses relating to loans
			transferred to other assets or sold			26			25			109			211			23
Provision for loan losses						169			199			199			224			374
Allowance relating to loans acquired, transferred
		to other assets or sold				(69	)		(80	)		(158	)		(315	)		(58	)
Net charge-offs						(169	)		(195	)		(199	)		(224	)		(374	)
Balance, end of period					$	2,704			2,747			2,798			2,847			2,951
as a % of loans, net						1.66	%		1.67			1.72			1.81			1.86
as a % of nonaccrual and restructured loans (a)						180	%		169			177			163			163
as a % of nonperforming assets (a)						166	%		158			161			149			150
LOAN LOSSES
Commercial, financial and agricultural					$	128			150			136			160			319
Real estate — commercial construction and mortgage						7			2			12			5			3
Real estate — residential mortgage						2			2			1			3			1
Installment loans and vehicle leasing						89			91			91			91			86
				Total loan losses		226			245			240			259			409
LOAN RECOVERIES
Commercial, financial and agricultural						37			29			24			17			16
Real estate — commercial construction and mortgage						1			—			—			—			2
Real estate — residential mortgage						1			—			1			—			—
Installment loans and vehicle leasing						18			21			16			18			17
				Total loan recoveries		57			50			41			35			35
				Net charge-offs	$	169			195			199			224			374
Commercial loan net charge-offs as % of
	average commercial loans, net (b)					0.42	%		0.53			0.53			0.61			1.24
Consumer loan net charge-offs as % of
	average consumer loans, net (b)					0.44			0.44			0.52			0.56			0.48
Total net charge-offs as % of average loans, net (b)						0.43	%		0.49			0.52			0.59			0.97
NONPERFORMING ASSETS
Nonaccrual loans
	Commercial, financial and agricultural				$	1,153			1,260			1,269			1,440			1,456
	Real estate — commercial construction and mortgage					96			111			105			137			144
	Real estate — residential mortgage					82			73			79			62			60
	Installment loans and vehicle leasing					170			178			132			112			145
				Total nonaccrual loans		1,501			1,622			1,585			1,751			1,805
Foreclosed properties (c)						130			118			150			156			156
				Total nonperforming assets	$	1,631			1,740			1,735			1,907			1,961
Nonperforming loans included in loans held for sale (d)					$	167			114			138			115			108
Nonperforming assets included in loans and in loans
	held for sale				$	1,798			1,854			1,873			2,022			2,069
as % of loans, net, and foreclosed properties (a)						1.00	%		1.06			1.06			1.21			1.23
as % of loans, net, foreclosed properties and loans in
	other assets as held for sale (d)					1.04	%		1.08			1.11			1.23			1.24
Accruing loans past due 90 days					$	293			289			304			284			250

(a)	These ratios do not include nonperforming loans included in loans held for sale.
(b)	Annualized.
(c)	Restructured loans are not significant.
(d)	These ratios reflect nonperforming loans included in loans held for sale. Loans held for sale, which are included in other assets, are recorded at the lower of cost or market value, and accordingly, the amounts shown and included in the ratios are net of the transferred allowance for loan losses and the lower of cost or market value adjustments.

58

Table 12
NONACCRUAL LOAN ACTIVITY (a)

		2003						2002
		Second			First			Fourth			Third			Second
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period		$	1,622			1,585			1,751			1,805			1,685
Commercial nonaccrual loan activity
Commercial nonaccrual loans, beginning of period			1,371			1,374			1,577			1,600			1,499
New nonaccrual loans and advances			291			386			485			528			721
Gross charge-offs			(135	)		(152	)		(148	)		(165	)		(322	)
Transfers (to) from loans held for sale			(44	)		12			(105	)		(134	)		—
Transfers to other real estate owned			(6	)		(1	)		(4	)		(8	)		—
Sales			(29	)		(70	)		(49	)		(31	)		(134	)
Other, principally payments			(199	)		(178	)		(382	)		(213	)		(164	)
	Net commercial nonaccrual loan activity		(122	)		(3	)		(203	)		(23	)		101
Commercial nonaccrual loans, end of period			1,249			1,371			1,374			1,577			1,600
Consumer nonaccrual loan activity
Consumer nonaccrual loans, beginning of period			251			211			174			205			186
New nonaccrual loans and advances, net			22			56			55			38			35
Transfers to loans held for sale			(21	)		—			—			(58	)		—
Sales and securitizations			—			(16	)		(18	)		(11	)		(16	)
	Net consumer nonaccrual loan activity		1			40			37			(31	)		19
Consumer nonaccrual loans, end of period			252			251			211			174			205
Balance, end of period		$	1,501			1,622			1,585			1,751			1,805

(a) Excludes nonaccrual loans included in loans held for sale and foreclosed properties.

59

Table 13
GOODWILL AND OTHER INTANGIBLE ASSETS

		2003				2002
		Second		First		Fourth		Third		Second
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
Goodwill		$	10,907		10,869		10,880		10,810		10,728
Deposit base			977		1,097		1,225		1,363		1,508
Customer relationships			254		258		239		222		229
Tradename			90		90		90		90		90
	Total goodwill and other intangible assets	$	12,228		12,314		12,434		12,485		12,555

60

Table 14
DEPOSITS

		2003				2002
		Second		First		Fourth		Third		Second
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
CORE DEPOSITS
Noninterest-bearing		$	48,081		46,348		44,640		44,186		39,558
Savings and NOW accounts			52,765		52,430		51,691		49,305		49,367
Money market accounts			55,927		50,439		45,649		44,644		41,124
Other consumer time			30,620		32,017		33,763		35,562		36,730
	Total core deposits		187,393		181,234		175,743		173,697		166,779
OTHER DEPOSITS
Foreign			6,561		6,985		6,608		7,603		8,262
Other time			7,338		7,618		9,167		6,485		5,622
	Total deposits	$	201,292		195,837		191,518		187,785		180,663

61

Table 15
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE

		June 30, 2003
(In millions)
MATURITY OF
3 months or less		$	2,315
Over 3 months through 6 months			2,595
Over 6 months through 12 months			1,291
Over 12 months			3,788
	Total	$	9,989

62

Table 16
LONG-TERM DEBT

					2003				2002
					Second		First		Fourth		Third		Second
(In millions)					Quarter		Quarter		Quarter		Quarter		Quarter
NOTES AND DEBENTURES ISSUED BY
	THE PARENT COMPANY
	Notes
		4.95% to 7.70%, due 2003 to 2006			$	6,500		6,500		6,500		6,473		6,470
		Floating rate, due 2003 to 2005				840		1,120		1,720		1,866		1,866
		Floating rate extendible, due 2005				10		10		10		10		10
		Floating rate indexed notes, due 2005				19		—		—		—		—
	Subordinated notes
		5.625% to 7.50%, due 2005 to 2009				3,639		3,900		4,060		4,428		4,439
		8.00%, due 2009				149		149		149		149		149
		6.605%, due 2025				250		250		250		250		250
		6.30%, Putable/Callable, due 2028				200		200		200		200		200
		Floating rate, due 2003				150		150		150		150		150
	Subordinated debentures
		6.55% to 7.574%, due 2026 to 2035				795		795		795		795		795
Hedge-related basis adjustments						1,123		1,062		1,094		1,094		597
			Total notes and debentures issued by the
				Parent Company		13,675		14,136		14,928		15,415		14,926
NOTES ISSUED BY SUBSIDIARIES
Notes, primarily notes issued under global bank
	note programs, varying rates and terms to 2040					6,188		7,287		7,562		7,680		8,636
Subordinated notes
	5.875% to 6.75%, due 2003 to 2006					575		825		825		825		925
	Bank, 5.80% to 7.875%, due 2006 to 2036					2,547		2,547		2,547		2,544		2,544
	7.800% to 7.95%, due 2006 to 2007					248		247		398		572		572
			Total notes issued by subsidiaries			9,558		10,906		11,332		11,621		12,677
OTHER DEBT
Trust preferred securities						3,021		3,021		3,020		2,990		2,990
Collateralized notes, floating rate, due 2006 to 2007						4,420		4,420		4,420		4,391		2,459
4.556% auto securitization financing, due 2008						13		29		61		97		138
Advances from the Federal Home Loan Bank						5,010		5,010		5,255		4,758		4,663
Preferred units — The Money Store, LLC						57		57		57		57		—
Capitalized leases						768		1,210		176		22		22
Mortgage notes and other debt of subsidiaries						17		7		6		6		6
Hedge-related basis adjustments						512		408		407		401		50
			Total other debt			13,818		14,162		13,402		12,722		10,328
			Total		$	37,051		39,204		39,662		39,758		37,931

63

Table 17
CHANGES IN STOCKHOLDERS’ EQUITY

			2003						2002
			Second			First			Fourth			Third			Second
(In millions)			Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period			$	32,267			32,078			32,105			30,379			28,785
Comprehensive income
	Net income			1,032			1,027			895			916			855
	Net unrealized gain on debt and equity securities			78			15			70			780			637
	Net unrealized gain (loss) on derivative financial instruments			(46	)		(48	)		(7	)		257			308
		Total comprehensive income		1,064			994			958			1,953			1,800
Purchases of common stock				(619	)		(501	)		(674	)		—			—
Common stock issued for
	Stock options and restricted stock			139			71			(24	)		5			96
	Acquisitions			—			—			—			51			—
Deferred compensation, net				4			(21	)		69			78			32
Cash dividends
	Preferred shares			(1	)		(4	)		(4	)		(3	)		(6	)
	Common shares			(390	)		(350	)		(352	)		(358	)		(328	)
Balance, end of period			$	32,464			32,267			32,078			32,105			30,379

64

Table 18
CAPITAL RATIOS

		2003									2002
		Second			First		Fourth		Third			Second
(In millions)		Quarter			Quarter		Quarter		Quarter			Quarter
CONSOLIDATED CAPITAL RATIOS (a)
Qualifying capital
	Tier 1 capital	$	22,270			21,718		21,411		21,001			20,264
	Total capital		31,871			31,471		31,289		31,135			30,778
Adjusted risk-weighted assets			267,447			262,574		260,609		259,057			258,826
Adjusted leverage ratio assets		$	328,483			323,879		316,473		307,890			300,141
Ratios
	Tier 1 capital		8.33	%		8.27		8.22		8.11			7.83
	Total capital		11.92			11.99		12.01		12.02			11.89
	Leverage		6.78			6.71		6.77		6.82			6.75
STOCKHOLDERS’ EQUITY TO ASSETS
Quarter-end			8.91			9.27		9.38		9.62			9.36
Average			9.47	%		9.50		9.68		9.67			9.40
BANK CAPITAL RATIOS
Tier 1 capital
	Wachovia Bank, National Association		7.76	%		7.66		7.42		7.63			7.71
	Wachovia Bank of Delaware, National Association		16.01			15.56		14.35		11.97			10.29
Total capital
	Wachovia Bank, National Association		11.94			11.99		11.81		12.12			11.97
	Wachovia Bank of Delaware, National Association		18.94			18.49		16.58		14.59			12.30
Leverage
	Wachovia Bank, National Association		6.45			6.30		6.25		6.61			6.89
	Wachovia Bank of Delaware, National Association		11.83	%		11.52		11.04		8.03			7.16

(a) Risk-based capital ratio guidelines require a minimum ratio of tier 1 capital to risk-weighted assets of 4.00 percent and a minimum ratio of total capital to risk-weighted assets of 8.00 percent. The minimum leverage ratio of tier 1 capital to adjusted average quarterly assets is from 3.00 percent to 4.00 percent.

65

Table 19
RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS (a)

			June 30, 2003
					Gross Unrealized								In-			Average
			Notional										effective-			Maturity in
(In millions)			Amount		Gains		Losses (f)			Equity (g)			ness (h)			Years (i)
ASSET HEDGES
Cash flow hedges (b)
	Interest rate swaps—receive fixed		$	37,230		4,171		(9	)		2,571			6			6.11
	Interest rate swaps—pay fixed			1,574		—		(242	)		(150	)		—			7.05
	Interest rate options			7,000		56		(7	)		30			—			1.82
	Forward purchase commitments			1,751		—		(6	)		(4	)		—			0.13
	Futures			4,000		43		—			27			—			0.25
Fair value hedges (c)
	Interest rate swap—pay fixed			1,010		—		(43	)		—			(1	)		20.76
	Forward sale commitments			1,162		—		(5	)		—			4			0.02
		Total asset hedges	$	53,727		4,270		(312	)		2,474			9			5.09
LIABILITY HEDGES
Cash flow hedges (d)
	Interest rate swaps—pay fixed		$	23,054		—		(2,593	)		(1,604	)		(1	)		6.33
	Interest rate options			49,200		2		(1,062	)		(654	)		(2	)		4.07
	Futures			9,365		—		(93	)		(58	)		—			0.25
Fair value hedges (e)
	Interest rate swaps—receive fixed			15,347		1,878		—			—			—			4.05
	Interest rate options			150		—		—			—			—			0.06
		Total liability hedges	$	97,116		1,880		(3,748	)		(2,316	)		(3	)		4.23

66

     We use derivative contracts, primarily interest rate swaps, to manage exposure to interest rate risk. Derivatives used to protect against variability in the periodic payments associated with floating rate assets, liabilities or forecasted transactions are designated as cash flow hedges. Generally, receive-fixed swaps are used to hedge the variability associated with the floating rate loans we make; pay-fixed swaps are used to hedge the variability associated with our forecasted issuance of fixed rate short-term liabilities.

     Derivatives used to protect against changes in the fair value of fixed-rate assets and liabilities due to changes in interest rates are designated as fair value hedges. Generally, we use pay-fixed swaps to hedge the fair value of our fixed rate assets, principally available for sale securities, and we use receive-fixed swaps to hedge the fair value of our fixed rate liabilities, mainly debt. The following provides additional detail of our hedging relationships.

(a)  Includes only derivative financial instruments related to interest rate risk management activities. All other derivative financial instruments are classified as trading.

(b)  Receive-fixed interest rate swaps with a notional amount of $37.2 billion, of which $8.1 billion are forward-starting, and with pay rates based on one-to-six month LIBOR are primarily designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of one-to-six month LIBOR-indexed loans. Pay-fixed interest rate swaps with a notional amount of $1.6 billion and with receive rates based on one-month LIBOR are designated as cash flow hedges of available for sale securities. Interest rate option combinations with a notional amount of $6.0 billion that qualify as net purchased options are designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of one-month LIBOR-indexed loans, when one-month or three-month LIBOR is above or below the strike rates of the written and purchased options. Net purchased options on receive fixed-swaps with a notional amount of $1.0 billion and a strike rate based on three-month LIBOR are designated as a cash flow hedge of the variability in cash flows related to the forecasted interest rate resets of one-month LIBOR-indexed loans. Forward purchase commitments of $1.8 billion are designated as a cash flow hedge of the variability of the consideration to be paid in the forecasted purchase of available for sale securities. Eurodollar futures with a notional amount of $4.0 billion are designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of three-month LIBOR-indexed loans.

(c)  Pay-fixed swaps with a notional amount of $1.0 billion and receive rates based on one-month LIBOR are designated as fair value hedges of available for sale securities. Forward sale commitments of $1.2 billion are designated as fair value hedges of mortgage loans in the warehouse.

(d)  Derivatives with a notional amount of $74.7 billion are designated as cash flow hedges of the variability in cash flows attributable to the forecasted issuance of fixed rate short-term liabilities that are part of a rollover strategy, primarily repurchase agreements and deposit products. Of this amount, $9.4 billion are Eurodollar futures, $19.6 billion are pay-fixed interest rate swaps with receive rates based on one-to-six month LIBOR, of which $11.1 billion are forward-starting, and $42.9 billion are net purchased options on pay-fixed swaps with a strike based on three-month LIBOR. Interest rate collars with a notional amount of $2.8 billion that qualify as net purchased options also hedge the forecasted issuance of fixed rate short-term liabilities that are part of a rollover strategy, when three-month LIBOR is below the sold floor or between the purchased and written caps. Derivatives with a notional amount of $6.9 billion are primarily designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of one-to-three month LIBOR-indexed long-term debt. Of this amount, $3.5 billion are purchased options on pay-fixed swaps with a strike based on three-month LIBOR, and $3.4 billion are pay-fixed interest rate swaps with receive rates based on one-to-three month LIBOR.

(e)  Receive-fixed interest rate swaps with a notional amount of $15.3 billion and with pay rates based primarily on one-to-six month LIBOR are designated as fair value hedges of fixed rate liabilities, primarily CDs, long-term debt and bank notes.

(f)  Represents the fair value of derivative financial instruments less accrued interest receivable or payable.

(g)  At June 30, 2003, the net unrealized gain on derivatives included in accumulated other comprehensive income, which is a component of stockholders’ equity, was $382 million, net of income taxes. Of this net of tax amount, a $158 million gain represents the effective portion of the net gains (losses) on derivatives that qualify as cash flow hedges, and a $224 million gain relates to terminated and/or redesignated derivatives. At June 30, 2003, $590 million of net gains, net of income taxes, recorded in accumulated other comprehensive income are expected to be reclassified as interest income or expense during the next twelve months. The maximum length of time over which cash flow hedges are hedging the variability in future cash flows associated with the forecasted transactions is 22.85 years.

(h)  In the six months ended June 30, 2003, gains in the amount of $6 million were recognized in other fee income representing the ineffective portion of the net gains (losses) on derivatives that qualify as cash flow and fair value hedges. In addition, net interest income for the six months ended June 30, 2003, was reduced by $495,000 representing ineffectiveness of cash flow hedges caused by differences between the critical terms of the derivative and the hedged item, primarily differences in reset dates.

(i)  Estimated maturity approximates average life.

67

Table 20
RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS — EXPECTED MATURITIES

	June 30, 2003
	1 Year			1-2			2-5			5-10			After 10
(In millions)	or Less			Years			Years			Years			Years			Total
CASH FLOW ASSET HEDGES
Notional amount — swaps-receive fixed	$	1,169			1,569			10,167			24,233			92			37,230
Notional amount — swaps-pay fixed		10			—			169			1,357			38			1,574
Notional amount — other	$	5,751			7,000			—			—			—			12,751
Weighted average receive rate (a)		5.75	%		6.58			5.84			5.36			5.28			5.52
Weighted average pay rate (a)		1.24	%		1.28			1.22			1.32			2.17			1.29
Unrealized gain (loss)	$	83			118			980			2,806			19			4,006
FAIR VALUE ASSET HEDGES
Notional amount — swaps-pay fixed	$	—			—			—			—			1,010			1,010
Notional amount — other	$	1,162			—			—			—			—			1,162
Weighted average receive rate (a)		—	%		—			—			—			0.86			0.86
Weighted average pay rate (a)		—	%		—			—			—			3.65			3.65
Unrealized gain (loss)	$	(6	)		—			—			—			(42	)		(48	)
CASH FLOW LIABILITY HEDGES
Notional amount — swaps-pay fixed	$	1,488			864			7,721			10,280			2,701			23,054
Notional amount — other	$	8,890			9,080			22,895			17,700			—			58,565
Weighted average receive rate (a)		1.23	%		1.25			1.15			1.08			1.05			1.11
Weighted average pay rate (a)		3.25	%		3.50			5.55			7.21			6.39			6.17
Unrealized gain (loss)	$	(332	)		(509	)		(626	)		(1,858	)		(421	)		(3,746	)
FAIR VALUE LIABILITY HEDGES
Notional amount — swaps-receive fixed	$	1,400			1,650			8,300			3,475			522			15,347
Notional amount — other	$	150			—			—			—			—			150
Weighted average receive rate (a)		6.46	%		7.08			6.46			6.47			6.66			6.54
Weighted average pay rate (a)		1.12	%		1.20			1.35			1.24			1.29			1.29
Unrealized gain (loss)	$	44			124			937			630			143			1,878

(a) Weighted average receive and pay rates include the impact of currently effective interest rate swaps and basis swaps only and not the impact of forward-starting interest rate swaps. All of the interest rate swaps have variable pay or receive rates based on one-to-six month LIBOR, and they are the pay or receive rates in effect at June 30, 2003.

Table 21
RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS ACTIVITY

	Asset			Liability
(In millions)	Hedges			Hedges			Total
Balance, December 31, 2002	$	45,830			89,263			135,093
Additions		17,400			21,143			38,543
Maturities and amortizations		(9,137	)		(13,390	)		(22,527	)
Terminations		(265	)		(1	)		(266	)
Redesignations and transfers to trading account assets		(101	)		101			—
Balance, June 30, 2003	$	53,727			97,116			150,843

68

WACHOVIA CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES (a)

				SECOND QUARTER 2003							FIRST QUARTER 2003
								Average							Average
						Interest		Rates					Interest		Rates
				Average		Income/		Earned/			Average		Income/		Earned/
(In millions)				Balances		Expense		Paid			Balances		Expense		Paid
ASSETS
Interest-bearing bank balances				$	4,751		16		1.34	%	$	3,688		13		1.43	%
Federal funds sold and securities purchased under resale agreements					12,282		35		1.10			8,949		29		1.33
Trading account assets (b)					18,254		200		4.40			16,298		196		4.84
Securities (b)					68,994		977		5.67			72,116		1,020		5.66
Loans (b) (c)
	Commercial
		Commercial, financial and agricultural			55,726		584		4.20			56,464		593		4.26
		Real estate — construction and other			6,901		61		3.54			6,800		60		3.57
		Real estate — mortgage			16,325		189		4.66			16,537		192		4.69
		Lease financing			6,885		187		10.87			6,777		184		10.86
		Foreign			6,627		47		2.89			6,461		50		3.11
			Total commercial		92,464		1,068		4.63			93,039		1,079		4.69
	Consumer
		Real estate — mortgage			25,290		314		4.97			25,292		333		5.27
		Installment loans and vehicle leasing			39,981		621		6.22			39,633		625		6.38
			Total consumer		65,271		935		5.73			64,925		958		5.95
			Total loans		157,735		2,003		5.09			157,964		2,037		5.21
Other earning assets					11,859		134		4.52			9,580		114		4.81
			Total earning assets excluding derivatives		273,875		3,365		4.92			268,595		3,409		5.11
Risk management derivatives (d)					—		392		0.57			—		371		0.56
			Total earning assets including derivatives		273,875		3,757		5.49			268,595		3,780		5.67
Cash and due from banks					10,845							10,887
Other assets					56,998							57,799
			Total assets	$	341,718						$	337,281
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits
	Savings and NOW accounts				52,196		71		0.55			50,887		79		0.63
	Money market accounts				53,302		156		1.18			47,987		142		1.20
	Other consumer time				31,330		243		3.09			32,671		263		3.27
	Foreign				6,841		24		1.44			7,304		27		1.47
	Other time				7,542		35		1.88			8,656		42		1.97
			Total interest-bearing deposits		151,211		529		1.40			147,505		553		1.52
Federal funds purchased and securities sold under repurchase agreements					37,957		149		1.57			37,392		147		1.60
Commercial paper					2,381		5		0.80			2,604		4		0.70
Securities sold short					8,121		58		2.84			6,734		44		2.67
Other short-term borrowings					4,267		15		1.44			4,170		18		1.72
Long-term debt					35,751		366		4.10			38,744		388		4.01
			Total interest-bearing liabilities excluding derivatives		239,688		1,122		1.88			237,149		1,154		1.97
Risk management derivatives (d)					—		52		0.08			—		48		0.08
			Total interest-bearing liabilities including derivatives		239,688		1,174		1.96			237,149		1,202		2.05
Noninterest-bearing deposits					42,589							41,443
Other liabilities					27,079							26,637
Stockholders’ equity					32,362							32,052
			Total liabilities and stockholders’ equity	$	341,718						$	337,281
Interest income and rate earned — including derivatives						$	3,757		5.49	%			$	3,780		5.67	%
Interest expense and equivalent rate paid — including derivatives							1,174		1.71					1,202		1.81
Net interest income and margin — including derivatives						$	2,583		3.78	%			$	2,578		3.86	%

(a)	Certain amounts presented in periods prior to the second quarter of 2003 have been reclassified to conform to the presentation in the second quarter of 2003.
(b)	Yields related to securities and loans exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state tax rates. Lease financing amounts include related deferred income taxes.
(c)	The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

69

FOURTH QUARTER 2002								THIRD QUARTER 2002							SECOND QUARTER 2002
					Average							Average							Average
			Interest		Rates					Interest		Rates					Interest		Rates
	Average		Income/		Earned/			Average		Income/		Earned/			Average		Income/		Earned/
	Balances		Expense		Paid			Balances		Expense		Paid			Balances		Expense		Paid
	$	3,416		14		1.59	%	$	2,891		14		1.90	%	$	2,613		13		2.02	%
		9,507		39		1.63			10,474		49		1.83			10,835		52		1.97
		14,683		178		4.83			14,945		194		5.17			15,503		186		4.79
		71,249		1,045		5.86			62,806		999		6.36			58,169		967		6.65
		57,318		663		4.58			57,788		693		4.76			58,760		710		4.84
		7,133		68		3.80			7,809		81		4.10			8,115		84		4.19
		16,770		214		5.06			17,188		228		5.26			17,310		231		5.36
		7,112		187		10.53			7,105		189		10.65			7,286		193		10.60
		6,731		58		3.43			6,879		59		3.41			7,058		60		3.37
		95,064		1,190		4.97			96,769		1,250		5.13			98,529		1,278		5.20
		19,294		295		6.12			18,968		294		6.20			20,102		319		6.35
		38,921		655		6.69			36,191		651		7.15			36,717		662		7.22
		58,215		950		6.50			55,159		945		6.82			56,819		981		6.91
		153,279		2,140		5.55			151,928		2,195		5.75			155,348		2,259		5.83
		8,969		115		5.10			11,771		144		4.86			11,361		154		5.42
		261,103		3,531		5.39			254,815		3,595		5.62			253,829		3,631		5.73
		—		405		0.61			—		371		0.58			—		317		0.50
		261,103		3,936		6.00			254,815		3,966		6.20			253,829		3,948		6.23
		10,636							9,955							10,110
		58,221							56,741							50,775
	$	329,960						$	321,511						$	314,714
		49,768		99		0.79			48,883		115		0.93			49,060		122		1.00
		45,618		156		1.35			43,495		167		1.53			40,035		171		1.71
		34,834		331		3.78			36,034		347		3.82			36,967		365		3.96
		8,030		33		1.59			6,491		30		1.84			7,195		33		1.88
		8,674		45		2.08			6,134		33		2.13			6,220		32		2.00
		146,924		664		1.79			141,037		692		1.95			139,477		723		2.08
		32,608		149		1.81			32,094		149		1.85			32,109		145		1.80
		2,796		7		0.87			3,001		9		1.19			3,027		8		1.18
		5,644		35		2.44			6,422		42		2.58			6,671		40		2.45
		3,881		15		1.67			3,082		18		2.25			3,368		22		2.60
		38,758		405		4.18			37,540		412		4.38			38,755		420		4.34
		230,611		1,275		2.20			223,176		1,322		2.35			223,407		1,358		2.44
		—		132		0.22			—		124		0.22			—		75		0.13
		230,611		1,407		2.42			223,176		1,446		2.57			223,407		1,433		2.57
		40,518							38,772							38,448
		26,885							28,460							23,283
		31,946							31,103							29,576
	$	329,960						$	321,511						$	314,714
			$	3,936		6.00	%			$	3,966		6.20	%			$	3,948		6.23	%
				1,407		2.14					1,446		2.26					1,433		2.26
			$	2,529		3.86	%			$	2,520		3.94	%			$	2,515		3.97	%

(d) The rates earned and the rates paid on risk management derivatives are based on off-balance sheet notional amounts. The fair value of these instruments is included in other assets and other liabilities.

70

WACHOVIA CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES (a)

				SIX MONTHS ENDED 2003							SIX MONTHS ENDED 2002
								Average							Average
						Interest		Rates					Interest		Rates
				Average		Income/		Earned/			Average		Income/		Earned/
(In millions)				Balances		Expense		Paid			Balances		Expense		Paid
ASSETS
Interest-bearing bank balances				$	4,222		29		1.38	%	$	3,472		35		2.05	%
Federal funds sold and securities
	purchased under resale agreements				10,624		64		1.20			11,424		107		1.91
Trading account assets (b)					17,281		396		4.61			14,733		351		4.78
Securities (b)					70,546		1,997		5.67			57,177		1,881		6.58
Loans (b) (c)
	Commercial
		Commercial, financial and agricultural			56,092		1,177		4.23			59,451		1,430		4.85
		Real estate — construction and other			6,851		121		3.55			8,120		170		4.23
		Real estate — mortgage			16,431		381		4.68			17,237		469		5.49
		Lease financing			6,831		371		10.86			7,364		386		10.48
		Foreign			6,545		97		3.00			6,945		122		3.54
			Total commercial		92,750		2,147		4.66			99,117		2,577		5.24
	Consumer
		Real estate — mortgage			25,291		647		5.12			20,769		673		6.48
		Installment loans and vehicle leasing			39,808		1,246		6.30			36,445		1,328		7.34
			Total consumer		65,099		1,893		5.84			57,214		2,001		7.03
			Total loans		157,849		4,040		5.15			156,331		4,578		5.89
Other earning assets					10,728		248		4.65			11,218		294		5.28
			Total earning assets excluding derivatives		271,250		6,774		5.01			254,355		7,246		5.72
Risk management derivatives (d)					—		763		0.57			—		656		0.52
			Total earning assets including derivatives		271,250		7,537		5.58			254,355		7,902		6.24
Cash and due from banks					10,866							10,331
Other assets					57,396							50,331
			Total assets	$	339,512						$	315,017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits
	Savings and NOW accounts				51,545		150		0.59			48,852		250		1.03
	Money market accounts				50,659		298		1.19			38,819		334		1.73
	Other consumer time				31,997		506		3.18			37,567		764		4.10
	Foreign				7,071		51		1.46			7,385		68		1.87
	Other time				8,096		77		1.93			7,165		75		2.11
			Total interest-bearing deposits		149,368		1,082		1.46			139,788		1,491		2.15
Federal funds purchased and securities
	sold under repurchase agreements				37,676		296		1.58			32,132		291		1.82
Commercial paper					2,492		9		0.75			3,231		18		1.16
Securities sold short					7,431		102		2.76			6,616		78		2.39
Other short-term borrowings					4,219		33		1.58			3,676		49		2.69
Long-term debt					37,240		754		4.05			39,669		850		4.29
			Total interest-bearing liabilities excluding derivatives		238,426		2,276		1.92			225,112		2,777		2.48
Risk management derivatives (d)					—		100		0.09			—		133		0.12
			Total interest-bearing liabilities including derivatives		238,426		2,376		2.01			225,112		2,910		2.60
Noninterest-bearing deposits					42,019							38,289
Other liabilities					26,859							22,374
Stockholders’ equity					32,208							29,242
			Total liabilities and stockholders’ equity	$	339,512						$	315,017
Interest income and rate earned — including derivatives						$	7,537		5.58	%			$	7,902		6.24	%
Interest expense and equivalent rate paid — including derivatives							2,376		1.76					2,910		2.30
Net interest income and margin — including derivatives						$	5,161		3.82	%			$	4,992		3.94	%

(a)	Certain amounts presented in 2002 have been reclassified to conform to the presentation in 2003.
(b)	Yields related to securities and loans exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state tax rates. Lease financing amounts include related deferred income taxes.
(c)	The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.
(d)	The rates earned and the rates paid on risk management derivatives are based on off-balance sheet notional amounts. The fair value of these instruments is included in other assets and other liabilities.

71

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

			2003						2002
			Second			First			Fourth			Third			Second
(In millions, except per share data)			Quarter			Quarter			Quarter			Quarter			Quarter
ASSETS
Cash and due from banks			$	13,088			13,161			12,264			11,930			10,668
Interest-bearing bank balances				7,539			4,855			3,512			3,561			2,269
Federal funds sold and securities purchased under
	resale agreements (carrying amount of collateral held
	$6,002 at June 30, 2003, $3,285 repledged)			13,854			11,092			9,160			7,132			11,541
		Total cash and cash equivalents		34,481			29,108			24,936			22,623			24,478
Trading account assets				40,436			34,678			33,155			35,902			34,570
Securities				73,764			73,339			75,804			72,071			60,999
Loans, net of unearned income				162,833			164,222			163,097			157,542			158,800
	Allowance for loan losses			(2,704	)		(2,747	)		(2,798	)		(2,847	)		(2,951	)
		Loans, net		160,129			161,475			160,299			154,695			155,849
Premises and equipment				4,635			5,118			4,903			5,422			5,494
Due from customers on acceptances				1,074			1,485			1,051			1,080			1,105
Goodwill				10,907			10,869			10,880			10,810			10,728
Other intangible assets				1,321			1,445			1,554			1,675			1,827
Other assets				37,538			30,547			29,257			29,602			29,629
		Total assets	$	364,285			348,064			341,839			333,880			324,679
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
	Noninterest-bearing deposits			48,081			46,348			44,640			44,186			39,558
	Interest-bearing deposits			153,211			149,489			146,878			143,599			141,105
		Total deposits		201,292			195,837			191,518			187,785			180,663
Short-term borrowings				49,123			44,812			41,173			36,350			39,148
Bank acceptances outstanding				1,078			1,492			1,061			1,093			1,110
Trading account liabilities				25,141			20,896			22,900			22,210			22,445
Other liabilities				18,136			13,556			13,447			14,579			13,003
Long-term debt				37,051			39,204			39,662			39,758			37,931
		Total liabilities		331,821			315,797			309,761			301,775			294,300
STOCKHOLDERS’ EQUITY
Dividend Equalization Preferred shares, no par value,
	97 million shares issued and outstanding at June 30, 2003			—			—			—			2			5
Common stock, $3.33-1/3 par value; authorized 3 billion
	shares, outstanding 1.332 billion shares at June 30, 2003			4,440			4,484			4,524			4,577			4,570
Paid-in capital				17,784			17,903			18,070			18,233			18,106
Retained earnings				8,106			7,778			7,349			7,221			6,663
Accumulated other comprehensive income, net				2,134			2,102			2,135			2,072			1,035
		Total stockholders’ equity		32,464			32,267			32,078			32,105			30,379
		Total liabilities and stockholders’ equity	$	364,285			348,064			341,839			333,880			324,679

72

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

		2003						2002
		Second			First			Fourth			Third			Second
(In millions, except per share data)		Quarter			Quarter			Quarter			Quarter			Quarter
INTEREST INCOME
Interest and fees on loans		$	2,391			2,407			2,538			2,558			2,563
Interest and dividends on securities			900			939			978			935			906
Trading account interest			179			174			158			179			173
Other interest income			224			196			203			240			252
	Total interest income		3,694			3,716			3,877			3,912			3,894
INTEREST EXPENSE
Interest on deposits			619			639			832			847			836
Interest on short-term borrowings			321			306			295			310			300
Interest on long-term debt			234			257			280			289			297
	Total interest expense		1,174			1,202			1,407			1,446			1,433
Net interest income			2,520			2,514			2,470			2,466			2,461
Provision for loan losses			195			224			308			435			397
Net interest income after provision for loan losses			2,325			2,290			2,162			2,031			2,064
FEE AND OTHER INCOME
Service charges			426			430			421			432			420
Other banking fees			248			233			236			232			241
Commissions			488			444			473			458			481
Fiduciary and asset management fees			461			438			439			427			466
Advisory, underwriting and other investment banking fees			208			137			182			143			192
Trading account profits (losses)			69			100			(42	)		(71	)		33
Principal investing			(57	)		(44	)		(105	)		(29	)		(42	)
Securities gains			10			37			46			71			58
Other income			313			303			328			227			261
	Total fee and other income		2,166			2,078			1,978			1,890			2,110
NONINTEREST EXPENSE
Salaries and employee benefits			1,748			1,699			1,681			1,588			1,665
Occupancy			190			197			202			195			194
Equipment			238			234			255			234			231
Advertising			34			32			16			20			25
Communications and supplies			136			141			143			136			132
Professional and consulting fees			104			99			126			111			96
Other intangible amortization			131			140			147			152			161
Merger-related and restructuring expenses			96			64			145			107			143
Sundry expense			327			297			327			402			279
	Total noninterest expense		3,004			2,903			3,042			2,945			2,926
Income before income taxes			1,487			1,465			1,098			976			1,248
Income taxes			455			438			203			60			393
	Net income		1,032			1,027			895			916			855
Dividends on preferred stock			1			4			4			3			6
	Net income available to common stockholders	$	1,031			1,023			891			913			849
PER COMMON SHARE DATA
Basic earnings		$	0.77			0.77			0.66			0.67			0.62
Diluted earnings			0.77			0.76			0.66			0.66			0.62
Cash dividends		$	0.29			0.26			0.26			0.26			0.24
AVERAGE COMMON SHARES
Basic			1,333			1,335			1,350			1,362			1,360
Diluted			1,346			1,346			1,360			1,374			1,375

73

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

		Six Months Ended
		June 30,
(In millions, except per share data)		2003			2002
INTEREST INCOME
Interest and fees on loans		$	4,798			5,200
Interest and dividends on securities			1,839			1,762
Trading account interest			353			328
Other interest income			420			507
	Total interest income		7,410			7,797
INTEREST EXPENSE
Interest on deposits			1,258			1,751
Interest on short-term borrowings			627			586
Interest on long-term debt			491			573
	Total interest expense		2,376			2,910
Net interest income			5,034			4,887
Provision for loan losses			419			736
Net interest income after provision for loan losses			4,615			4,151
FEE AND OTHER INCOME
Service charges			856			845
Other banking fees			481			477
Commissions			932			945
Fiduciary and asset management fees			899			943
Advisory, underwriting and other investment banking fees			345			328
Trading account profits			169			137
Principal investing			(101	)		(132	)
Securities gains			47			52
Other income			616			542
	Total fee and other income		4,244			4,137
NONINTEREST EXPENSE
Salaries and employee benefits			3,447			3,328
Occupancy			387			389
Equipment			472			457
Advertising			66			44
Communications and supplies			277			266
Professional and consulting fees			203			184
Other intangible amortization			271			329
Merger-related and restructuring expenses			160			135
Sundry expense			624			563
	Total noninterest expense		5,907			5,695
Income before income taxes			2,952			2,593
Income taxes			893			825
	Net income		2,059			1,768
Dividends on preferred stock			5			12
	Net income available to common stockholders	$	2,054			1,756
PER COMMON SHARE DATA
Basic earnings		$	1.54			1.29
Diluted earnings			1.53			1.28
Cash dividends			0.55			0.48
AVERAGE COMMON SHARES
Basic			1,334			1,357
Diluted		$	1,346			1,370

74

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

			Six Months Ended
			June 30,
(In millions)			2003			2002
OPERATING ACTIVITIES
Net income			$	2,059			1,768
Adjustments to reconcile net income to net cash provided (used) by operating activities
	Accretion and amortization of securities discounts and premiums, net			132			(4	)
	Provision for loan losses			419			736
	Securitization gains			(220	)		(156	)
	Gain on sale of mortgage servicing rights			(61	)		(33	)
	Securities transactions			(47	)		(52	)
	Depreciation and other amortization			740			829
	Trading account assets, net			(7,281	)		(9,184	)
	Mortgage loans held for resale			26			1,034
	Loss on sales of premises and equipment			20			3
	Contribution to qualified pension plan			(418	)		(246	)
	Other assets, net			(7,540	)		787
	Trading account liabilities, net			2,241			2,671
	Other liabilities, net			4,775			(1,116	)
		Net cash used by operating activities		(5,155	)		(2,963	)
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
	Sales of securities			12,115			15,906
	Maturities of securities			14,402			6,078
	Purchases of securities			(24,435	)		(21,788	)
	Origination of loans, net			(379	)		2,337
	Sales of premises and equipment			762			85
	Purchases of premises and equipment			(873	)		(226	)
	Goodwill and other intangible assets			(65	)		(112	)
	Purchase of bank-owned separate account life insurance			(123	)		(96	)
		Net cash provided by investing activities		1,404			2,184
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
	Purchases (sales) of deposits, net			9,774			(6,790	)
	Securities sold under repurchase agreements and other short-term borrowings, net			7,950			1,724
	Issuances of long-term debt			660			717
	Payments of long-term debt			(3,271	)		(4,519	)
	Issuances of common stock			48			82
	Purchases of common stock			(1,120	)		—
	Cash dividends paid			(745	)		(668	)
		Net cash provided (used) by financing activities		13,296			(9,454	)
		Increase (decrease) in cash and cash equivalents		9,545			(10,233	)
		Cash and cash equivalents, beginning of year		24,936			34,711
		Cash and cash equivalents, end of period	$	34,481			24,478
NONCASH ITEMS
Transfer to securities from loans			$	—			2,041
Transfer to other assets from loans, net			$	343			(1	)

75 EX-31.A 6 g84377exv31wa.htm SECTION 302 CERTIFICATION FOR CEO

Exhibit (31)(a)

WACHOVIA CORPORATION
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, G. Kennedy Thompson, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Wachovia Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2003

/s/ G. Kennedy Thompson G. Kennedy Thompson

Chief Executive Officer

EX-31.B 7 g84377exv31wb.htm SECTION 302 CERTIFICATION FOR CFO

Exhibit (31)(b)

WACHOVIA CORPORATION
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Robert P. Kelly, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Wachovia Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2003

/s/ Robert P. Kelly Robert P. Kelly

Chief Financial Officer

EX-32.A 8 g84377exv32wa.htm SECTION 906 CERTIFICATION FOR CEO

Exhibit (32)(a)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Wachovia Corporation (“Wachovia”) for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, G. Kennedy Thompson, Chief Executive Officer of Wachovia, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Wachovia.

/s/ G. Kennedy Thompson

G. Kennedy Thompson

Chief Executive Officer

August 14, 2003

EX-32.B 9 g84377exv32wb.htm SECTION 906 CERTIFICATION FOR CFO

Exhibit (32)(b)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Wachovia Corporation (“Wachovia”) for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert P. Kelly, Chief Financial Officer of Wachovia, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Wachovia.

/s/ Robert P. Kelly

Robert P. Kelly

Chief Financial Officer

August 14, 2003

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EX-12.A

COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS

EX-12.B

COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS

EX-19

WACHOVIA'S 2ND QUARTER 2003 FINANCIAL SUPPLEMENT

EX-31.A

SECTION 302 CERTIFICATION FOR CEO

EX-31.B

SECTION 302 CERTIFICATION FOR CFO

EX-32.A

SECTION 906 CERTIFICATION FOR CEO

EX-32.B

SECTION 906 CERTIFICATION FOR CFO